Options Brief: OmniVision Technologies

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.

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.

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