Betting on a Range in Hartford Financial

A June straddle suggests an investor expects the stock to tip-toe around today's level of $28 later term.

Author:: Jud Pyle
Publish date:: Mar 18, 2010 3:38 PM EDT

By Jud Pyle, CFA, chief investment strategist for the Options News Network

Shares of insurance name

Hartford Financial Services Group

are hovering around the $28-mark so far on Thursday, and at least one investor expects the stock to continue to tip-toe around this level throughout the later term, and expressed that bet by selling a June straddle.

HIG shares are currently trading down more than 2% to $27.90 following the company's share offer pricing this morning. HIG announced that it priced around 52 million shares of common stock at $27.75 per share and also priced 20 million depository shares at $25 each. The company has not announced an earnings release date, but the market expects the report around April 29.

At about 10:50 a.m. EST, an investor sold 15,000 near-the-money June 28-strike straddles for $4.45 per spread. The June 28 calls traded for $2.45 per contract, and the June 28 puts crossed for $2 per contract. The calls are home to current open interest of 3,200 contracts, while current open interest of the puts is 1,800 contracts, indicating investors traded the straddle to open betting that the stock could experience a later-term range. Investors will make money if HIG shares close between $23.55 to the downside and $32.45 to the upside. Implied volatility of the June 28 calls and puts is roughly 38%, compared to a 30-day historical volatility of 60%.

Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.

Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."