Bears are keeping pressure on Terex
David Russell | email@example.com
optionMONSTER's Depth Charge monitoring system detected the purchase of 3,000 June 16 puts for about $1. 42 and the sale of an equal number of June 19 puts for $3.67. Volume was below open interest in the 19s, indicating that an existing position was rolled to the lower strike.
The investor collected a credit of $2.25 in the process and still has the right to profit from further downside in the maker of heavy machinery. Adjusting the trade let him or her take some money off the table and boosted the gamma to 0.15 from 0.07.
This means that the new contracts will increase their leverage much more quickly if the stock continues to decline. (See our Education section)
TEX is down 5.59 percent to $15.69 in morning trading and has lost almost one-third of its value in the last month. Worries about a slowing economy have hammered the stock despite a string of better-than-expected earnings reports since last October.
Another benefit of today's trade is that bid/ask spreads are tighter in strikes that are closer to the money.
Overall option volume in the name is almost twice the average amount, with calls outnumbering puts by more than 20 to 1.