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Trade sees cap on Discovery Financial

Chris McKhann (chris.mckhann@optionmonster.com)

Shares of Discover Financial Services are just off all-time highs, but one trader apparently believes that further upside is limited.

A trader sold 2,500 December 43 calls for $0.70 across several exchanges, according to optionMONSTER's tracking systems. Open interest at the start of the day was just 368 contracts, so this is a new position.

The calls could have been sold naked with an initial bearish bias. They could also have been traded against long shares in a covered call position, which would be bullish up to the $43 strike price but would give up any gains beyond that. (See our Education section)

DFS trades at $41.20, up fractionally on the day. The bank holding company finished last Tuesday at $41.42, its highest close ever, though it has been trading in an increasingly tight range in the last two weeks. Shares have almost doubled from a year ago and have climbed steadily from below $5 at the March 2009 low.

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