One investor apparently thinks that Renren is going nowhere.
Our tracking systems detected the sale of 10,000 October 4 puts for $0.52 and the same number of October 5 calls for $0.46. The trade accounted for almost all the option volume in the Chinese social-networking stock yesterday.
The trade resulted in a credit of $0.98, which the investor will keep as a profit if RENN is between $4 and $5 on expiration. Gains will erode outside that range, turning to losses below $3.02 or above $5.98.
RENN climbed 0.88 percent to $4.59 yesterday. It went public for $14 a share in May 2011 and steadily trended lower through the end of last year. The shares have been churning in a range since then, and the option trader is looking for that price action to continue through the autumn.
Known as a short strangle , the trade is an example of a market-neutral strategy designed to make money from the passage of time rather than a directional move. (See our Education section)
Overall option volume was almost twice the average amount in the session.
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