U.S. Markets closed

Trader calls a top for U.S. Airways

David Russell (david.russell@optionmonster.com)

One investor apparently believes that the monster run might be over for U.S. Airways.

optionMONSTER's Depth Charge monitoring system detected the purchase of 3,500 January 20 puts for $2.06 and the sale of an equal number of November 21 calls for $0.70. Volume exceeded open interest at both strikes, indicating that both positions were initiated.

Owning puts ensures a minimum selling price for the stock, while writing calls forces the investor to dump his or her shares if they reach the strike price. Combining the two strategies hedges against a pullback while also limiting future gains. It's usually known a collar trade.

The unusual aspect of today's transaction is that the trader used different expiration months, keeping downside protection in place longer than he or she is on the hook to sell a rally. (See our Education section for the myriad ways options can be combined to help you manage positions more effectively.)

LCC is up 1.25 percent to $20.09 in afternoon trading. The stock is up 49 percent so far this year and is testing levels last seen in December 2007.

Overall option volume is slightly above average in the stock so far today, according to the Depth Charge.

More From optionMONSTER