Thursday, May 5, 2011

Trade of the Day: Equinix January $110/$130/$145 call butterfly

The Trade: 
A trader bought 9,400 January $110 calls at $6.30, sold 18,800 January $130 calls at $1.60, and bought 9,400 January $145 calls at $0.70 for a debit of $3.80 or $3,572,000.  The butterfly: Options 101

The line shown is the break even price is $113.80. Equinix has not traded above the break even price since 2007. EQIX closed trading today at $99.19. Therefore, the trader is bullish.

This spread was entered shortly after a large June butterfly spread was closed for a profit. It's interesting to note that the trader chose strike prices that are not equally spaced apart. Also, the trader may have chosen the leaps because of a possible Rho edge. The EQX traded 41,983 contracts compared to average daily volume of 3,398.

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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