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Markets

How puts are managing Cemex position

Cemex is pulling back after a big move, and one investor wants a piece of the action.

optionMONSTER's tracking systems detected the sale of 5,000 July 6 puts in the Mexican cement giant for $0.41. Volume was more than twice open interest in the strike.

The trader is now obligated to buy shares for $6 if they go below that level but, including the $0.41 credit earned, the entry price would be $5.59. If the stock doesn't go that low, he or she will simply keep the $0.41 as a profit while the options expire worthless.

CX spent about a week consolidating above $6 in January. That could be leading some chart watchers to believe that it will now provide support--and therefore help explain the trade.

Selling puts is a popular strategy when investors like a company but don't want to spend capital buying stock up front. It lets them make money from the passage of time , while also positioning them to get lon g in the event of a pullback. (See our Education section)

CX fell 6.13 percent to $6.12 yesterday. It fell to an all-time low under $3 in October, weighed down by huge debt and weak demand. Since then, however, volumes have started to improve and management has taken steps to improve its credit profile. That helped the stock more than triple between early October and early February, though it's been drifting lower since then.

The put sale pushed total options volume in CX to more than triple the daily average.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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