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Trader sees lower volatility in Discover

Chris McKhann (chris.mckhann@optionmonster.com)

Call selling tops today's option activity in Discover Financial Services in a strategy that appaears to be looking for lower volatiliity.

More than 11,000 DFS options trade on the day, compared to a daily average of 700. optionMONSTER systems show that a trader sold 10,000 March 40 calls for the bid price of $0.65, a new position as there was no open interest at the start of the session.

Less than a minute later, a single print of 310,000 DFS shares traded for $38.27. Given that the delta of the calls was 0.31, this certainly looks like a market-neutral short-volatility play. (See our Education section)

DFS is up fractionally at $38.59 in midday trading. Shares were up near $41 last week and at a high just above $42 at the start of December. Support at $38 has been tested several times but has held up since August.

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