Strangle Strategist Targets VeriSign Options

Today’s tickers: VRSN, CAT, EWZ & XCO VRSN - VeriSign, Inc. – Symantec Corp. agreed to shell out $1.28 billion in cash to purchase VeriSign Inc.’s authentication services unit in a deal reportedly set to close by the end of September. Despite securing a buyer for its unit, which certifies that websites are legitimate and safe for online transactions, VeriSign’s shares are lower by 1.75% to stand at $27.50 as of 11:20 am (ET). VeriSign received an upgrade to ‘buy’ from ‘hold’ at Deutsche Bank today where analysts tout a 12-month target share price of $35.00 on the stock. One options strategist expecting shares of the underlying stock to remain range-bound through September expiration sold a strangle to reap the benefits of inflated options implied volatility. The investor sold 10,300 calls at the September $31 strike for a premium of $1.00 each and sold the same number of puts at the lower September $28 strike for $2.85 apiece. Gross premium pocketed on the transaction amounts to $3.85 per contract. The trader keeps the full premium received on the sale as long as shares trade within the range of the strike prices described through expiration. The short sale of both call and put options expose the investor to potential losses should shares rally above the upper breakeven price of $34.85, or if shares slip beneath the lower breakeven point at $24.15, ahead of expiration. Another investor opted to take profits off the table by selling a previously established long call position in the September contract. Perhaps the trader is taking in whatever profits are available now in case shares continue lower ahead of expiration. It looks like the investor originally purchased at least 15,000 calls at the September $28 strike for an average premium of $1.45 apiece back on April 15, 2010, when shares were trading at a volume-weighted average premium of $26.84. Today the options trader sold 15,000 calls at that strike for a premium of $2.15 each, receiving net profits of $0.70 per contract. In hindsight the investor could have raked in more substantial gains had he sold the calls yesterday when VeriSign’s shares surged to a 52-week high of $29.23 on the news Symantec Corp. agreed to buy out the authentication services unit at VRSN. CAT - Caterpillar, Inc. – Options activity on the machinery manufacturer casts a glimmer of optimism on the stock despite the 4.45% decline in the price of…