Options Player Portends Share Price Shift at Isilon Systems

ISLN – Isilon Systems, Inc. – An investor expecting Isilon’s shares to shift significantly come November expiration purchased a call spread and initiated a long stance in protective put options on the stock this morning. Shares of the computer services company are currently down 2.8% at $25.40 as of 12:30 pm ET. Isilon’s shares have come roaring back to life this year, rallying up 328.7% since touching down at a 2010-low of $6.15 on January 29, to touch a 52-week high of $26.37 on October 8. The purchase of a call spread suggests the investor is looking for ISLN shares to hit new highs by November expiration, while the purchase of put options represents protective positioning in case the bullish prediction fails to pan out. Isilon reports third-quarter earnings before the market opens on October 21, 2010. The options strategist paid a net $1.95 per contract, buying 3,000 calls at the November $30 strike, selling 3,000 calls at the higher November $35 strike, and purchasing 3,000 puts at the November $22.5 strike. Profits start to accumulate for the trader if shares surge 25.8% over the current price of $25.40 to surpass the effective breakeven point on the call spread at $31.95 by expiration day. Maximum potential profits of $3.05 per contract are available to the trader if shares jump 37.8% to exceed $35.00 by November expiration. Finally, the puts are a profitable acquisition for the investor if Isilon’s shares plunge 19.1% lower to trade below the effective breakeven price of $20.55 by expiration day next month.

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.