Maxim Integrated Products has been trapped below $29 for years, and one investor is using that level to earn income on the chip maker.
optionMONSTER's tracking programs detected the sale of 2,775 May 29 calls for an average premium of about $0.385. An equal number of April 29 calls were bought at the same time for $0.035, but volume was below open interest in that strike.
This activity suggests that a investor had been short the April calls and was rolling the position forward by one month. He or she collected a credit of $0.35 in the process and remains on the hook to sell MXIM shares for $29, but only if it rises above that level on or before May 18.
Selling calls is a common way to deal with risk because the income generated can be used to reduce the cost of owning the stock . That makes it easier to hold a position over time, which in turn can mitigate tax liabilities. (See our Education section for more on how options can be used to manage trades.)
MXIM rose 0.57 percent yesterday to close at $28.09. It briefly hit $29 last month but quickly fell. That level was support in 2007 and resistance last year, so they may expect it to remain a barrier in the near term.
Total overall option volume in the stock was 15 times greater than average in yesterday's session.
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