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October 19, 2012  Fri 11:11 AM CT

NAV: SEE CHART GET CHAIN FIND STRATEGIES
Navistar shares are crumbling today, and one investor apparently thinks that the selling could intensify.

optionMONSTER's Depth Charge monitoring program detected a large bearish trade in the truck maker, which has been struggling to develop low-emission engines. Some 14,000 October 20 puts were sold for $0.25 against previous open interest. Equal-sized blocks traded in the November 18 calls, sold for $2.45, and the November 16 puts, bought for $0.35.

Volume exceeded open interest in the Novembers, so it appears that the investor closed a bearish position in October and rolled it forward by one month. He or she collected a credit of $2.35 in the process and stand to profit from NAV pushing lower. (See our discussion of collars)

The trader may own shares and could be using the options to hedge their position. If that's the case, he or she must now sell for $18 if the stock closes above that level on Nov. 16 but has ensured a minimum exit price of $16. They would make more than that including today's credit, but we don't know their cost basis from the earlier trade.

NAV is down 7.3 percent to $19.04 in early afternoon trading and has lost more than half its value since February. The stock has spent the last four months trying to hold support around $20, its lowest price since the start of 2009.

Today's bearish trade pushed total option volume to 9 times greater than average so far today, according to the Depth Charge.
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