Options Trading News

November 14, 2012  Wed 2:45 AM CT

The bears are targeting Air Products & Chemicals, which has been making lower highs more than a year.

optionMONSTER's Depth Charge monitoring program detected the purchase of 2,400 November 80 puts for $0.40 and $0.45 against open interest of just 505 contracts. The trades dominated activity in the company, which provides pressurized gas to a wide array of industrial clients.

Those puts lock in the price where investors can sell shares, so they will move inversely to the stock. While similar to short selling, the strategy has less risk because the options can lose only the initial investment in the event of a rally. (See our Education section for more on how trading options can be safer than trading stocks.)

APD rose 0.74 percent to $80.54 yesterday but has been drifting lower since July 2011. It gapped down on Oct. 19 after earnings missed expectations, then partly rebounded. Yesterday's traders apparently think that downward momentum will resume.

More than 3,000 contracts traded in the session, triple normal volume. Puts outnumbered calls by 18 to 1.
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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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