Cemex (CX, news, chart, volatility) options volume is running at 6 times the average daily levels, after large blocks of January 7.5 puts and January 12.5 calls traded on the PHLX this morning. Trades include 10,000 calls on the bid for 35 cents and 10,000 7.5 puts on the offer for 55 cents. The same trades took place earlier with 8,250 lots. Volume in both contracts has now surpassed 20,000.

Shares were near $9.75, roughly midway between the two strikes, and the action is probably collar trades. That is, the investor is taking a position in shares, while writing calls. The paid 20 cents for the options part of the position (55 – 35), which increases the cost basis of owning shares to $9.95. The upside is capped by the short calls at $12.50 or 25.6 percent above the new cost basis of the shares. Downside is limited by the puts to $7.50 (or 24.6 percent). So, the investor is taking a bullish view on the shares (buy-writes), but hedging that bet with January 7.5 puts.