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Range-bound trade on Crown Castle

Crown Castle International has been moving sideways, and one investor wants to profit from the range-bound trade.

optionMONSTER's tracking programs detected the sale of 13,740 October 37 puts for $0.50 and 13,740 October 45 calls for $0.25. Volume was more than twice open interest in both strikes.

Known as a short straddle , the strategy is designed to make money from the passage of time rather than a directional move. It will also benefit from the accelerating pace of time decay that will occur as expiration approaches on Oct. 21. (See our Education section)

The trader collected a credit of $0.75, which he or she will keep if CCI stays between $37 and $45. It hasn't violated that range in the last six months. That $0.75 will provide some protection if it's broken, but only down to $36.25 and up to $45.75.

CCI fell 1.67 percent to $41.25 on Friday and has been holding its ground despite S&P 500's recent drop. The owner of cellular towers has been supported by investor hopes it will transform itself into a real-estate investment trust. Such a move would reduce its taxes and allow it to pay dividends.

The short straddle pushed total option volume to more than 50 times average in the session.

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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