GG – Goldcorp, Inc. – A short strangle implemented on the Canadian company engaged in the acquisition, exploration, development and operation of precious metal properties today suggests one strategist expects the price of the underlying stock to remain range-bound through expiration in September. Goldcorp’s shares fell as much as 2.45% during the first half of the session to touch an intraday low of $41.59, but shares are currently on the mend, and are trading 0.95% lower on the day to arrive at $42.24 as of 12:40 pm ET. The investor responsible for selling the strangle may be taking advantage of Goldcorp’s earlier 5.5% increase in options implied volatility to today’s high of 34.18%. The options player sold 4,000 calls at the September $47.5 strike for premium of $0.18 each, and sold the same number of puts at the lower September $38 strike for a premium of $0.39 apiece. Gross premium pocketed on the transaction amounts to $0.57 per contract. The investor keeps the full amount of premium received as long as Goldcorp’s shares trade within the boundaries of the strike prices selected through expiration. Short positions in both call and put options in this case expose the trader to potentially devastating losses should shares break out of the $38.00 to $47.50 range. Losses accumulate for the strangle seller if Goldcorp’s shares rally above the upper breakeven price of $48.07, or if shares plummet through the lower breakeven point at $37.43 ahead of expiration day.
Affiliation: Interactive Brokers
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.
Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.
Visit: Interactive Brokers