Markets

Trader sees Seagate running out of gas

Seagate Technology has made a sharp move, and now one trader apparently thinks that it's going to halt just as quickly.

The disk-drive maker rallied almost 50 percent between early March and the beginning of this week, fueled by improving sentiment in the industry. Plagued for years by commoditization and excess capacity, the outlook started brightening on March 7 when rival Western Digital agreed to buy Hitachi's hard-drive operations.

STX then followed with a strong earnings report on April 7 and its own purchase, this time of Samsung's business, on April 19.

Today an investor sold 5,850 January 17.50 STX calls for $2.27 and 5,580 January 17.50 puts for $2.41. The trade, known as a short straddle, let the investor collect a credit of $4.68 in return for placing a big bet that STX will remain around $17.50 into early next year.

The activity is similar to a strategy on Safeway yesterday, where an investor sold the May 23 puts and the May 25 calls. Like STX, the supermarket stock had staged a brief yet ferocious rally following a long period of weakness. (See our Education section for more on how investors can use options to make money from a range-bound stock.)

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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