Markets

Norfolk Southern seen staying on rails

One big investor is betting that Norfolk Southern will stay on track into the New Year.

optionMONSTER's tracking programs detected the sale of more than 14,000 January 65 puts for $0.65 and the purchase of an equal number of January 55 puts for $0.15. Volume was more than triple open interest in both strikes.

Known as a put credit spread , the trade paid the investor $0.50. In return, he or she has agreed to buy the stock for $65 if it falls below that level. (See our Education section)

NSC is up 0.42 percent to $70.11 in midday trading and is attempting to hold support at its 200-day moving average. It's been riding a bullish trend in the railroad stocks, beating estimates the last two times earnings came out.

Based on today's trade, it appears that the investor is using the puts to manage a potential entry into the stock. The strategy will let the trader enter NSC on a pullback while allowing him or her to make some money in case it doesn't drop all the way to $65. At the same time, the 55 puts provide a hedge in case a major selloff occurs.

The transaction pushed total option volume to 27 times greater than average 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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