Options Trading News

December 12, 2012  Wed 3:47 AM CT

With Aetna now back at resistance, one trader is betting that the stock's next move could be lower.

optionMONSTER's Depth Charge tracking system detected the purchase of 4,000 July 43 puts for $3.30 and the sale of an equal number of July 36 puts for $1.03. There was no open interest at either strike before the trade appeared, so this is new positioning.

The transaction cost $2.27 and will earn a maximum profit of 208 percent if the health insurer closes at or below $36 on expiration. (See our Education section for more on the strategy, known as a bearish put spread because it leverages a move between two prices.)

AET fell 0.45 percent to $44.48 yesterday. It's up 17 percent in the last three months and sitting near the $44.50 level where it stalled in May and October. That could be leading some chart watchers to believe that it's ready to drop.

Yesterday's trader could own shares and could be hedging the long position by using the options. Or this could simply be a bearish speculative bet.

Nearly 9,000 AET contracts traded in the session, triple its daily average. Puts outnumbered calls by a bearish 20-to-1 ratio, according to the Depth Charge.
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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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