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January 10, 2013  Thu 10:02 AM CT

IACI: SEE CHART GET CHAIN FIND STRATEGIES
IAC/InterActive has been struggling, and one investor apparently thinks that more downside is coming.

optionMONSTER's Depth Charge tracking program detected the purchase of 1,500 February 45 puts for $2.05 and the sale of an equal number of February 40 puts for $0.50. Volume was more than 9 times the previous open interest at each strike, indicating new activity.

The trade cost $1.55 and will earn a maximum profit of 223 percent if the e-commerce stock closes at or below $40 on expiration. (See our Education section for more on the strategy, known as a bearish vertical spread.)

IACI is down 3.3 percent to $43.98 in morning trading. It touched an all-time high of $55.57 in October but then gapped lower after confusion surrounding its last quarterly report. Shares have been consolidating below their 200-day moving average since, which could be leading some chart watchers to expect further downside.

The company owns websites including Match.com and About.com. Its its next earnings-release date hasn't been announced but will probably occur early next month, based on last year's schedule.

Total option volume is 11 times greater than average in IACI so far today, with puts outnumbering calls by 10 to 1.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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