A generic image of a person holding a pen and paper
Markets

Trader looks for Xerox to grind higher

One investor thinks Xerox will grind higher into the spring.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 4,700 April 7 calls for $1.27 and the sale of an equal number of January 7.50 calls for $0.57. Volume was below open interest in January, so it appears that a bullish position was rolled from one contract to the other.

The transaction is interesting because the calls have different strike prices. It cost $0.70 but, because the calls were moved $0.50 deeper into the money , it really only cost $0.20. In return for that outlay, the trader gets an additional three months to profit from upside in the slow-moving stock.

XRX rose 3.89 percent to $8.02 yesterday and is trying to recover from the market's August selloff. The imaging company's last two earnings reports beat expectations as management seeks to increase its reliance on recurring revenue streams rather than equipment sales. (See researchLAB for more)

Yesterday's option trade was also noteworthy because the investor would have been at risk of losing premium on the January calls as expiration approaches. Rolling the position now prevented them from the accelerated pace of time decay that occurs as options near the end of their lives.

More than 16,000 contracts traded overall in XRX during the session, which is almost 5 times more than change hands in a typical 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.

In This Story

XRX

Other Topics

Options

Latest Markets Videos