Prologis (PLD) shares are up $1 to $15.70 on reports it is in merger talks with AMB Property (AMB) — Reuters. Shares moved higher in pre-market action and touched a 52-week high of $16.52 in morning trading. A noteworthy options play in PLD is a Mar 14 – 16 risk reversal, 6800X. Looks like 30 cents was collected to sell calls, buy puts, against a block of 680K shares at $15.83. Looks like a new collar position on the Denver-based industrial real estate company.

Basically, in this strategy, the strategist is selling calls, buying puts against shares. The options combination (calls sold for 60 cents and puts bought for 30 cents) reduces the cost of owning shares. In this case, the stock was bought at $15.83 and the combo sold at 30 cents. So, the cost of the stock is $15.53 with upside to $16, or 3 percent, through the March expiration. The downside is limited by the $14 put. This is an institutional play where the investor probably see a high probability of the stock holding above these levels due to the merger talks.