Options Trading News

October 14, 2013  Mon 12:22 PM CT

Traders apparently fear a quick selloff in Host Hotels & Resorts.

optionMONSTER's Depth Charge monitoring program detected the purchase of more than 5,000 October 17 puts for $0.10 and $0.15. Volume was more than 15 times open interest at the strike, indicating that new positions were initiated.

These puts lock in the price where shares can be sold, so they have an inverse relationship to the stock price. Investors use them to hedge long holdings or to speculate on a drop. (See our Education section)

Today's activity stands out because the contracts were very cheap and expire this Friday. This suggests that traders think that there could be a sharp selloff in the near term--well before earnings are released on Nov. 5.

HST is off a penny to $17.90 in afternoon trading after moving sideways all year. It's been making higher lows along its 200-day moving average while remaining trapped around $19 to the upside. Officially organized as a real-estate investment trust, the stock has outperformed other REITs by a huge margin during that time.

Total option volume in the name is 8 times greater than average in the session, according to the Depth Charge. Overall puts outnumber calls by a bearish 144-to-1 ratio.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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