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EMC Corporation (EMC) Call Seller Eyes Round-Number Resistance

EMC Corporation has not closed north of $30 on a monthly basis in more than 13 years

by 7/31/2014 2:35 PM
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EMC Corporation (NYSE:EMC) rallied to a new two-year peak of $29.90 yesterday, but found a stern layer of resistance from the round-number $30 mark -- a level EMC has not closed north of on a monthly basis since May 2001. In today's session, one speculator is gambling on this area to continue to serve as a ceiling for the next two months, but is giving herself a little wiggle room in the case of an unexpected rally.

Specifically, the September 31 call has seen the most action in EMC's options pits today, due mostly to a massive block of 19,070 contracts that traded earlier at a bid price of $0.35 apiece, pointing to seller-driven activity. What's more, volume easily outstrips the 1,040 contracts that currently make up open interest here, making it safe to assume new positions are being initiated.

Ideally, EMC will stay south of $31 through the close on Friday, Sept. 19 -- when back-month options expire -- allowing the call seller to retain the initial credit collected of $667,450 (number of contracts * premium collected * 100 shares per contract) as her full potential reward. However, should EMC surge past the strike price, she could be at risk of assignment, and face theoretically unlimited losses.

In today's session, the stock is succumbing to broad-market headwinds, and was last seen 1.2% lower at $29.54. In the near term, EMC Corporation (NYSE:EMC) could continue to struggle against the round-number $30 mark, as heavy accumulations of call open interest currently reside at the 30 strike in both the August and September series of options. Going forward, this could translate into options-related resistance , as the hedges related to these bets unwind ahead of the respective expiration dates.


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