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Renren is facing range-bound strategy

One investor apparently thinks that Renren is finally done moving.

optionMONSTER's tracking systems detected the sale of 5,000 January 4 calls for $0.25 and 5,000 January 4 puts for $0.65, resulting in a credit of $0.90. Volume was more than 4 times open interest in both strikes.

Known as a short straddle , the trade will make money if the Chinese e-commerce stock moves sideways for the next six weeks. The investor will realize a maximum profit if RENN closes at $4 on expiration. Gains will erode on either side of that level, turning to losses below $3.10 and above $4.90.

RENN fell 2.17 percent to $3.60 in early afternoon trading and has lost 47 percent of its value in the last three months. It went public only in May.

Implied volatility in the name is 89 percent, compared with its 75 percent historical volatility . That could make some traders think that premiums are too high, encouraging them to sell options. (See our Education section)

Overall option volume is 9 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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