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Trader collars American Express

Chris McKhann (chris.mckhann@optionmonster.com)

American Express has been range-bound since falling on earnings results last month, and one trader apparently looking to hedge a long position.

More than 16,000 AXP options traded, compared to a daily average of 2,810 over the last month. Topping the action is a January 2015 combination.

optionMONSTER systems show that a trader bought 5,000 of the 65 puts for $5 and sold the same number of the 85 calls for $3.90. Previous open interest was around 1,000 at each strike, so this is a clearly new activity.

The resulting combination trade cost $1.10 to open, which is the amount at risk if AXP remains between $65 and $85 through expiration. This is likely a collar to protect a long-stock position against a pullback, limiting the upside beyond $85 but capping losses below $65. (See our Education section)

AXP is up fractionally to $74.44 in midday trading after bouncing sharply off its morning lows. The financial giant hit a high of $78.63 in mid-July and was last below $65 in mid-April. Shares fell sharply after quarterly results on July 17 and have been trading sideways since, mostly between about $73.50 and $77.

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