Markets

How range-bound trade is playing KKR

One investor apparently thinks that KKR will be trapped in range for all of next year.

optionMONSTER's tracking systems detected the sale of 17,000 January 13 puts for $2.28 and the same number of January 15 calls for $1, resulting in a credit of $3.28. Volume was more than 21 times open interest in both strikes.

Known as a short strangle , the position is designed to make money from the passage of time rather than a directional move. The trader will get to keep the entire $3.38 if KKR stays between $13 and $15, but the gains will erode outside that range and turn to losses below $9.72 and above $18.28. (See our Education section)

KKR is up 0.89 percent to $12.46 in early afternoon trading. The private-equity firm has been drifting sideways since the market crashed over the summer. Given that the midpoint of the strangle is above its current stock price, today's trade reflects a belief that there is modest upside in the shares before they stall.

Total option volume is more than 120 times greater than average in the name so far today.

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

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


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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