NEW YORK (
) -- An investor sells calls on a moderately bearish bet that Xilinx shares could hold or decline during the next three months.
have blasted off from their March lows of around $15.50, and investors who believe the shares have further room to climb have a plentiful supply of out-of-the-money calls, thanks to at least one seller betting on an end to the rally.
The March 28 calls have crossed the tape 6,050 times versus open interest of 6,161 contracts (the volume of open interest suggests investors traded these options to close). The majority of these March 28 calls traded for around 36 cents per contract, which means the break-even price on this sale is $28.36. The call seller will make money if these options expire with the stock trading below $28.36 on the March 2010 expiration.
The March 28 calls have gained 3 cents on the day, and XLNX shares are currently trading up 23 cents to $25.25. Implied volatility of these calls is roughly 27.7. Keep in mind that call sellers expect the stock could hold its current levels or climb 12% as long as it stays below the break-even throughout the next month.
XLNX did not report any news today that could have instigated the heavy call selling, but at least one investor is taking a moderately bearish stance on the company and betting that the rally we have seen in the shares is reaching the end.
-- Written by Jud Pyle in Chicago
At the time of publication, Pyle did not hold a position in the stock mentioned. 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."