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Is tide turning for Thompson Creek?

At least one investor believes that Thompson Creek Metals is done going down.

optionMONSTER's monitoring systems detected the sale of 6,300 June 6 puts on the Canadian mining company against open interest of just 156 contracts. The first blocks priced for $0.80, but then premiums fell to $0.75 as the selling pressure mounted and the stock nudged higher.

TC ended Friday at $6.73, up 2.91 percent. It lost more than half its value in the first nine months of 2011 but has been working its way higher since hitting a 2-1/2 year low at the start of October.

Selling the puts obligates the trader to buy shares for $6 if they close at or below that level on expiration. But including the premium paid, the effective entry price would be $5.20 to $5.25.

The main hope is that TC remain above $6, in which case the puts will expire worthless and they'll keep the credit. It's a market-neutral strategy that profits from the passage of time rather than a directional move and is often used when investors like a stock but don't want to expend capital getting long.

Unlike owning shares, it has a fixed profit potential. Like owning shares, it has the risk of significant losses if the stock falls dramatically. (See related column by Chris McKhann)

Overall option volume was 7 times greater than 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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