Options Recap: Traction for Major Automaker?

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Is a well-known automaker ready to regain traction after skidding lower? One big investor seems to think so.

A massive put sale was detected yesterday in Fiat Chrysler (FCAU), apparently reflecting a belief further downside will be limited. If the trader is right, he or she will keep the premium. If they’re wrong, they’ll face the risk of losing money on 13.1 million shares.

The transaction hit less than an hour into the session, with 131,000 September 17 puts sold for $0.68. When you do all the math, they collected $8.9 million. It was the largest transaction in the entire options market yesterday.

FCAU was at $17 when the trade hit, but slipped a little to end the session up 0.89 percent at $16.91. The put seller’s maximum profit will be realized anywhere above $17. Below that level, they’ll essentially own shares. Including the income already received, their cost basis would be $16.32. (See our Knowledge Center.)

The stock has enjoyed a huge run, ripping from under $7 in October 2016 to almost $25 in January. Investors originally loved its turnaround story and strong SUV sales, but it’s hit its share of bumps recently. First, global trade wars darkened sentiment. Then celebrated CEO Sergio Marchionne died and quarterly results disappointed.

But chart watchers may think FCAU is at support after holding the same $16.50 zone where it bottomed in October. That may help explain Wednesday’s put selling.

Overall options volume in the name was 8 times the average in the last month.

In conclusion, this isn’t recommendation and everyone needs to do their own homework, but someone is placing a big bet FCAU is done crashing for now.

Fiat Chrysler (FCAU) chart with potential support level.
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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.