OptionsHouse

Options Trading News

January 24, 2013  Thu 3:16 AM CT

MAT: SEE CHART GET CHAIN FIND STRATEGIES
Bears toying with Mattel

One trader is playing the downside in Mattel, which is hovering at its highest price in more than a decade.

optionMONSTER's Depth Charge tracking program detected the purchase of almost 2,800 February 38 puts priced mostly for $1.05 and $1.10. The volume was above the strike's previous open interest of 2,006 contracts, indicating that this is a new position.

The investor can now sell shares in the toymaker for $38 in the next four weeks, no matter how far they may fall. That right will appreciate in value if the stock declines, generating significant inverse leverage because they cost so little.

For instance, if MAT drops 10 percent to about $34, the puts will almost quadruple in value. The trade could have been the work of speculative bear or an investor looking to protect a long position in the stock. (See our Education section)

MAT fell 0.47 percent to $37.98 yesterday, one session after touching its highest price since late 1998. The stock has been rising for the last four years as higher prices allow the company to beat estimates and increase profitability. The next quarterly report is scheduled for Feb. 1.

Total option volume was 9 times greater than average in the session, according to the Depth Charge. Puts outnumbered calls by a bearish 8-to-1 ratio.
Share this article with your friends


Related Stories

MAT

Why one trader is buying puts in Mattel

September 26, 2016

The toy maker is up 7 percent in the last three months, but one trader is positioning for a possible drop in coming weeks.

OptionsHouse

Premium Services

Education & Strategy

Using spreads to minimize risk

Last week we discussed the risk vs reward profile of a debit call spread in Wells Fargo (WFC). This week we will run thru the risk vs reward of selling a credit put spread to achieve the same exposure of that debit call spread.

View more education articles »