SAI – SAIC, Inc. – Shares of the provider of scientific, engineering, systems integration and technical services and solutions to all branches of the U.S. military, agencies of the U.S. Department of Defense, the intelligence community, and many other government agencies increased as much as 3.3% during the first half of the trading day to secure an intraday high of $15.70. The price of the underlying may have been helped higher by news SAIC was awarded a task worth up to $10 million with the U.S. Securities and Exchange Commission to provide services in support of the SEC’s Office of Information Technology. Options traders, despite the rally in SAIC shares, focused in on longer-term put options. Investors purchased approximately 1,900 in-the-money puts at the February 2011 $16 strike for an average premium of $1.15 apiece. Put buyers may be picking up the contracts to protect the value of a long position in SAIC shares, or could be initiating outright bearish bets that the stock is set to reverse course ahead of expiration. Traders also scooped up another 1,800 puts at the lower February 2011 $15 strike for an average premium of $0.70 each. Investors long the puts make money, or realize downside protection, if the price of the underlying stock slips beneath the average breakeven price of $14.85, or $14.30, respectively.
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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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