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

VeriSign ( VRSN) shares are currently trading up more than 1% so far on the day, moving higher with the rest of the market, and at least one investor sold a strangle in the application software company, calling for a range-bound share price for the next three months.

VRSN stock has climbed 32 cents to $26.57 a share, and the company did not announce any news today. VRSN has not announced its next earnings release date, but the market expects the report sometime around May 6.

Around 11:10 a.m. EST, an investor sold the June 25-27 strangle more than 7,300 times for roughly $2.30 per spread. The near-the-money June 25 puts crossed for 95 cents per contract, while the investor traded the June 27 calls for $1.35 per contract. The June 27 calls are home to current open interest of 553 contracts, while current open interest of the 25-strike puts is around 1,000 contracts, indicating the investor is putting on new risk in this short strangle position.

The 27-strike calls and 25-strike puts have an implied volatility of roughly 27%, compared to the 30-day historical volatility of 20%. If shares of VRSN are above $25 but below $27 at June expiration, the strangle seller could make a maximum profit of $2.30 per spread. If the stock swings significantly one way or the other, investors could incur unlimited losses. For this reason, strangle selling is a more risky bet that volatility will contract throughout the later-term and not necessarily bullish nor bearish.

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."

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