Emerging markets haven't been an exciting sector of late, and one investor is resorting to a slow-money trade to earn income.
optionMONSTER's tracking systems detected the sale of 5,000 January 2013 15 puts on Brazilian steelmaker Companhia Siderurgica Nacional for $2.90 against open interest of just 1,502 contracts. The transaction pushed total option volume in the stock to 10 times greater than average.
SID, which is down 0.98 percent to $16.21 this morning, has been grinding sideways since May. During that time it has been making incrementally higher lows, which could lead some traders think that it's still in an uptrend.
However, a strong U.S. dollar and China's policy of monetary tightening is reducing the allure of international growth stocks. Investors are now focusing their attention on domestic companies as employment and consumer spending gain momentum.
Selling puts is a common strategy in such an environment because it effectively lets the investor place a long bet on the stock and make money even if the shares fail to rally. In the case of today's trade, the position will profit as long as SID remains above $15 through expiration 25 months in the future. (See our Education section)
(Chart courtesy of tradeMONSTER)
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.