Bear toying with downside in Mattel
David Russell | [email protected]
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.