OVTI – OmniVision Technologies, Inc. – Shares in semiconductor image sensor devices manufacturer, OmniVision Technologies, fell as much as 7.2% in the first half of the trading day to reach an intraday low of $18.42, the lowest traded price since June 11. It looks like one options investor was prepared for the plunge in price and took profits off the table by rolling a previously established long put stance to a lower strike price in the October contract. The put player likely accumulated a total of 3,000 long puts at the October $24 strike for an average premium of $2.58 each starting on August 30, 2010, when OVTI shares were trading at a volume-weighted average price of $22.47. The subsequent erosion in the price of the underlying stock inflated premium on the deep-in-the-money puts. Thus, the investor was able to sell all 3,000 puts at that strike today at a richer premium of $4.70 a-pop. Net profits on the closing sale amount to an average of $2.12 per contract. Next, the trader braced for continued bearish movement in the price of OVTI shares by picking up a fresh batch of 3,000 in-the-money puts at the lower October $20 strike at a premium of $1.90 apiece. Profits on the new position start to accumulate for the investor if the semiconductor maker’s shares fall another 1.7% from today’s low of $18.42 to trade below the average breakeven price of $18.10 by October 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