Sony faces range-bound strategy

optionMONSTER

A long-term combination trade dominates today's option activity in Sony.

More than 13,000 SNE options have changed hands on the day, quadruple times the daily average over the last month. Much of this is in a January 2015 combination. optionMONSTER systems show that 4,200 each of the 20 calls and the 20 puts traded at the same time for $2.55 and $3.30, respectively. Both hit the bid price at the time, so this looks like a short straddle position.

It generated a credit of $5.85, which is the maximum profit if the Japanese electronics company closes at $20 on expiration. It will make money anywhere between $14.15 and $25.85. The trader is also betting that the actual volatility of SNE will be less than that implied by the options. The implied volatility of the options is 33 percent, while the 20 day historical volatility is 22 percent.

SNE is down fractionally to $19.46. It has been in a tight range since the start of October and was last outside the profit range of today's straddle in February. (See our Education section for other market-neutral strategies.)



More From optionMONSTER
View Comments

Recommended for You