A large trader is betting that SLM Corporation will continue recovering from its steep drop earlier this year.
optionMONSTER systems detected the purchase of 4,000 October 26 calls for an average price of $0.39 and the sale of 4,000 October 22 puts for about $0.88. Volume was well above the previous open interest in each strike, indicating that this is a new combination trade.
The position is highly bullish because a rally would boost the price of the long calls while depressing the value of the puts that were sold . But the opposite will occur if the stock drops, and the trader would be on the hook to buy shares if they fall below $22. (See our Education section)
SLM, better known as Sallie Mae, rose 0.28 percent to $24.95 yesterday. The student lender hit a six-year high of $27.34 on Jan. 16 but gapped lower on weak earnings and fell to $22 by early February. It has since rebounded and this month broke above recent resistance at the $24 level, rising above its 200-day moving average along the way.
Yesterday's combination trade pushed SLM's total option volume to nearly 4 times its daily average for the last month.
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