Options Trading News

Dollar General has been reeling lower after a huge run, and the bears are sharpening their claws.

optionMONSTER's Depth Charge monitoring program detected the purchase of almost 1,600 September 47 puts for $ Volume was more than 20 times open interest at the strike.

Those contracts lock in the price at which investors have the right to sell shares in the discount retailer, so they can generate nice leverage in the event of further downside. If the shares stop falling, however, they will expire worthless.

The investor may hedging a long position in the shares, or could be using the options to bet against the stock. While similar to short-selling, the strategy requires less margin because it doesn't have the risk of unlimited losses to the upside. See our Education Section for more on how options can be used to manage positions more efficiently.

DG fell 1.59 percent to $48.87 in afternoon trading. It more than doubled between early 2010 and July, but has been slipping since then as big investors including Berkshire Hathaway trim positions.

Overall option volume is almost quadruple the daily average so far, with puts accounting for more than two-thirds of the activity.