XRX – Xerox Corp. – It looks like one optimistic individual enacted a large-volume bullish risk reversal on the largest maker of high-speed color printers today in order to position for appreciation in the price of the underlying shares through September expiration. Xerox’s shares are currently up 0.50% at $9.58 just before 12:40 pm (ET). The bullish player appears to have sold 15,000 puts at the September $9.0 strike for a premium of $0.25 apiece in order to purchase the same number of call options at the higher September $10 strike for a premium of $0.35 each. The net cost of the spread amounts to $0.10 per contract. Thus, the trader responsible for the transaction makes money as long as XRX shares increase another 5.4% to surpass the effective breakeven price of $10.10 ahead of expiration day in September.
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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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