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Show of support for Wells Fargo

Chris McKhann (chris.mckhann@optionmonster.com)

A large trade is looking for a floor in shares of Wells Fargo through next spring.

optionMONSTER systems show detected the purchase of 7,500 January 36 puts for the ask price of $0.35 against open interest of 13,800. Corresponding blocks of 2,500 April 37 puts were sold for $0.89 in volume above open interest of 1,145 and 5,000 April 38 puts for the bid price of $1.09 against open interest of 266.

Given the trade data, the trader appears to be rolling a short-put position from January to the two April strikes. He or she is buying back the nearer-term puts and selling the later contracts in a new position at higher strikes three months later, reflecting the rise in the stock price. The trader is now looking for WFC to stay at least above $37 through mid-April and will be on the hook to buy shares if they fall below that level. (See our Education section)

WFC was down fractionally yesterday to close at $42.85. It was down to support at $41 at the end of August but tested that level a week ago Friday. Shares were above $44 in the start of August.

Just over 35,000 WFC options traded on the day, about twice the daily average over the last month.

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