Options Brief: Satyam Computer Services (SAY)

SAY – Satyam Computer Services Ltd. – A short straddle on global IT solutions provider, Satyam Computer Services Ltd., indicates one options strategist expects little movement in the price of the underlying stock through April 2011 expiration. Satyam’s shares rallied 0.75% to $5.27 just before 2:40 pm ET. It looks like the straddle-player sold 5,000 calls at the April 2011 $5.0 strike for premium of $0.85 each, and shed 5,000 puts at the same strike to pocket premium of $0.60 apiece. Gross premium enjoyed on the transaction amounts to $1.45 per contract. The investor keeps the full premium received on the sale if SAY’s shares settle at $5.00 at expiration. However, shifts in the share price in either direction away from $5.00 could result in losses to the trader. Losses start to accumulate if shares rally above the upper breakeven price of $6.45, or if shares breach the lower breakeven point at $3.55, ahead of expiration day in April.

About Andrew Wilkinson 1023 Articles

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

Be the first to comment

Leave a Reply

Your email address will not be published.