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Sirius XM Holdings Inc. (NASDAQ:SIRI) has been struggling near $3.50 since mid-March, and is now facing a double-barreled level of resistance here in the form of its 200- and 320-day moving averages. In fact, the latter trendline capped the equity's mid-June and early July rally attempts, and one trader on Wednesday rolled the dice on $3.50 to continue to check SIRI's advances over the next six months.
Shortly after yesterday's open, a block of 12,993 January 2015 3.50-strike calls was sold for $0.20 apiece, resulting in an initial credit of $259,860 (number of contracts * premium received * 100 shares per contract). Meanwhile, volume translated into open interest overnight, making it safe to assume new positions were initiated. If SIRI remains south of the strike through the close on Friday, Jan. 16, 2015, the trader can pocket the credit collected as her full potential reward. However, if SIRI stages a sharp rally over the next six months, the call seller could be at risk of assignment, and facing theoretically unlimited losses.
Widening the sentiment scope reveals that call writing has been a popular strategy toward a stock that's sitting modestly lower in 2014 to trade at $3.42. Over the past 20 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have sold to open 9.23 calls for each one they've bought. In today's session, Sirius XM Holdings Inc. (NASDAQ:SIRI) is on pace to widen its year-to-date deficit, with the shares off 0.6% ahead of the bell.