U.S. Markets close in 4 hrs 3 mins

Marriott trader focuses on volatility

David Russell (david.russell@optionmonster.com)

One trader apparently thinks that price action will get interesting in Marriott International.

optionMONSTER's monitoring programs detected the purchase of 5,500 January 35 puts for an average premium of $1.375 against open interest of just 565 contracts. Less than two minutes later, a large block of shares was bought in the hotel company.

Owning puts and stock at the same time leaves the investor directionally neutral on the name. Instead of benefiting from a specific direction, he or she is isolating the volatility component in the options. Sharp swings in MAR's price will increase the value of the options relative to the share price, but the trader will lose money if it doesn't move.

MAR rose 0.74 percent to $35.54 on Friday, and has mostly fluctuated between $35 and $30 since the spring. Implied volatility has been inching higher in recent weeks, which means that traders have already started looking for premiums to increase.  (See our Education section for more on how options are priced.)

Some 8,800 contracts traded in total on Friday, more than 11 times normal amounts.

More From optionMONSTER