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Investor Sells Calls in C.B. Richard Ellis

An investor has sold 25,500 out-of-the-money Sept. 15 calls at 90 cents an option.
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) -- Investors looking to buy call options in

C.B. Richard Ellis


have a plentiful supply thanks to significant call selling that boosted volume today.

Around 2:30 p.m. EST, an investor sold 25,500 out-of-the-money Sept. 15 calls for 90 cents per option. These calls have dropped 15 cents on the day. Current open interest of these calls is 117 contracts. The stock closed down 28 cents, or more than 2%, to $12.94 a share.

CBG did not announce any news this morning to account for the drop in the stock for the day. The company has not announced an earnings release date, but the market expects the quarterly report sometime around April 29.

Investors who sold these calls will make money if CBG shares close lower than the break-even price of $15.90 at the September options expiration. The Sept. 15 calls have an implied volatility of 45%, compared to a 30-day historical of 46%.

Normal daily options volume in CBG is roughly 1,500 contracts, but this investor's moderately bearish bet already trumped usual volume by 16 times that amount.

Call-selling activity such as this does not mean investors should run out and sell their CBG shares. The stock is trading near its 52-week high of $14, which could be the reason why an investor is calling for limited upside throughout the later-term. But this could also be an investor who is long the shares and is turning a position into a buy-write, where their maximum profit is realized if the shares close higher than $15 at September expiration.

-- Written by Jud Pyle in Chicago

At the time of publication, Pyle did not have a position in the stock. 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."