SHOO – Steven Madden, Ltd. – Fashion footwear and apparel maker, Steven Madden, Ltd., popped onto our ‘hot by options volume’ market scanner after one options investor initiated a short straddle in the June contract. SHOO’s shares are currently down 1.00% to $33.40 as of 12:30 pm (ET). The short straddle suggests the trader expects shares of the underlying stock to stagnate through June expiration. The investor sold 1,900 puts at the June $33.33 strike for a premium of $1.25 apiece, and sold 1,900 calls at the same strike for a premium of $1.40 each. Gross premium pocketed on the transaction amounts to $2.65 per contract. The straddle-player keeps the full amount of premium received today as long as shares settle at $33.33 at expiration. The premium enjoyed on the transaction protects the investor from losses should shares fail to center at $33.33. However, the straddle-seller will incur losses if shares of the underlying stock rally above the upper breakeven price of $35.98, or if shares fall beneath the lower breakeven point at $30.68, ahead of expiration day.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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