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May 29, 2013  Wed 4:14 AM CT

TC: SEE CHART GET CHAIN FIND STRATEGIES
Traders are apparently looking for a steep drop in Thompson Creek Metals.

optionMONSTER's Depth Charge system detected the purchase of 5,122 December 2 puts, almost all of them going for $0.15. These are clearly new positions, as open interest in the strike was a mere 10 contracts before the trades appeared.

The puts, which lock in the price where traders can sell the stock no matter how far it might fall, weren't tied to any stock trading identified by our systems yesterday. Because their $2 strike price is so low--45.5 percent below yesterday's close--they are more likely a straight bearish bet than a protective hedge on a previously established long position. (See our Education section)

TC rose 3.97 percent to $3.67 yesterday, bouncing off its 100-day moving average. The mining company gapped higher after reporting first-quarter results on May 9 but has been trading sideways since. The stock has not traded below $2 since July 2006.

Total option volume in the name topped 9,000 contracts, 8 times its daily average for the last month. Puts outnumbered calls by more than 2 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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