One investor apparently believes that VeriFone Systems is destined to spend the next eight months trapped in a range.
optionMONSTER's monitoring systems detected the sale of 3,000 October 50 calls for $5.52 and 3,000 October 50 puts for $7.23. Volume was more than 12 times open interest in both strikes.
The investor collected a credit of $12.75, which will be their maximum profit if PAY closes at $50 on expiration. Gains will erode on either side of that level, turning to losses below $37.25 and above $62.75.
The position gives significant room for shares to fluctuate until expiration. Known as a short straddle , the trade is an example of a strategy designed to make money from the passage of time rather than a directional move. (See our Education section)
PAY rose 0.02 percent to $47.90 yesterday. The maker of credit-card readers peaked near $59 almost one year ago, then proceeded to lose almost half its value in the next six months. It's been rallying since then and is now up about 50 percent from its lows last August.
Yesterday's short straddle is apparently aiming to exploit levels on PAY's chart. There is significant support above $40, based on peaks established in July and November, but it also has a long-term high from last March that could pose resistance.
Based on those levels, some traders might expect a range-bound trade for several months rather than new highs in the short term.
Overall option volume in the name was 6 times greater than average yesterday.
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.
Latest Markets Videos
- Social Security Checks Could Soar in 2023: Here's How Much Extra Seniors Might Receive
- Better Buy: Dogecoin vs. Terra Classic vs. Terra (LUNA)?
- Stimulus Update: MIllions Will Get a Stimulus Check in June. Are You One of Them?
- Bitcoin Uses 50 Times Less Energy Than Traditional Banking, New Study Shows