SandRidge faces range bound trade


SandRidge Energy has struggled at $6, and one investor thinks it will remain a key obstacle for the stock.

optionMONSTER's tracking programs detected the sale of 10,000 March 6 calls for $0.48 and 10,000 March 6 puts for $0.48. That totals up to a credit of $0.96, which is the maximum profit if the oil driller closes at $6 three months from now.

Known as a short straddle , the trade makes money from the passage of time rather than a directional move. Gains will erode on either side of $6, turning to losses under $5.04 and over $6.96. See our Education section for other market-neutral strategies.

SD fell 1.32 percent to $5.99 yesterday after opening at an eight-week high of $6.11. It peaked at $6.96 in October, only to fall sharply to below $6 in early November. The shares then consolidated below that level before falling fall all the way to $5.21 in December.

Based on that price action, chart watchers may expect a range between $5.21 and $6.96. That could help explain the logic behind Thursday's short straddle.

The trade pushed total option volume to quadruple the daily average.

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