Huge Three-Way Trade in E*Trade Financial (ETFC)

Shares of E*Trade Financial Corporation ETFC are trading higher today by 1.71%, currently at $1.48. The stock has been sold off heavily over the past few weeks, falling from a recent high of $1.91, a retracement of nearly 23%. The stock is now sitting on a horizontal support line. I would expect the stock to find support here and would be purchasing the stock. I am detecting a massive 3-way trade this afternoon in the name. The January 2011 Jan $2.00 call was just purchased 30,000 times for $0.21, the Jan 2011 $1.5 put was sold 30,000 times for $0.34, and the July $1 put was purchased 30,000 times for $0.04. This trade represents a large player getting long a risk reversal in the name of a net credit of $0.14 and then using the premium to get long puts of a shorter duration. Net credit on the whole transaction is $0.10. I love this trade. For one, it agrees with my long ETFC premise. Two, it gets long shares for a credit, which means that the trader still has a shot at pocketing some cash even if the stock does not move from here. Thirdly, this trade includes a hedge to the downside should some unexpected circumstance hit the stock. If initiating a new long position in the name I would suggest you enter half your position in this manner and half just outright purchases on the stock. Register for the LA Trader's Expo for Free Here!