Traders apparently believe that the upside potential in SanDisk is limited.
optionMONSTER's tracking systems detected the sale of about 10,000 February 55 calls for $0.99 to $1.03 and the purchase of an equal number of February 57.50 calls for $0.56 to $0.60. Volume was more than 16 times open interest in the strike.
The investor collected a credit of about $0.44, which he or she will get to keep if SNDK closes at or below $55 on expiration. The gains will erode above that level, with a maximum loss of $2.06 at $57.50. The traders may feel comfortable placing the trade because SNDK has been trapped under $55 since late 2007.
The stock rose 1.8 percent to $50.83 yesterday. The maker of flash memory popped following a better-than-expected earnings report on Oct. 21 but has been shuffling in a range since then. It had rallied sharply heading into that report, but guidance was only in line with estimates.
Yesterday's option trader seems to be betting that the next report after the bell on Jan. 25 will be unremarkable. If that's right, the position will make money from the resulting drop in call premiums. The maker of flash memory popped following a better-than-expected earnings report on Oct. 21, but has been shuffling in a range since then. (See our Education section for more on market-neutral strategies that profit from the passage of time .)
Overall option volume was 4 times greater than average in the session.
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