Thursday, April 28, 2011

Trade of the Day: Teradyne June $16/$18 call spread 3,000x

The Trade
A trader sold 3,000 June $18 calls at $0.25 and bought 3,000 June $16 calls at $1.10 for a debit of $0.85 or $255,000.

As you can see from the graph above, the spread profits from an increase in the underlying stock. Teradyne closed today at $16.03, down 2.26% on earnings. The break even price level for this spread is $16.85. The max loss is the debit of $255,000. The max profit price level at expiration is $18. The max profit of $345,000 is capped at this price level and above. The trader might be expecting the stock to bounce back higher, thinking that today's action was noise.

The chart shown above is the Teradyne hourly stock chart. The white line shown is the break even price. The yellow line shows last quarter's gap which the trader probably believes to be strong support and might think a bounce off this level could lead to a re-test of recent highs.

TER traded 22,519 contracts today compared to average daily volume 1,835. The 52-week range is a low of $8.84 and a high of $19.19.

Teradyne, Inc. is a global supplier of automatic test equipment. The company designs, develops, manufactures and sells automatic test systems and solutions used to test complex electronics in the consumer electronics, automotive, computing, telecommunications, and aerospace and defense industries.

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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