Options Trading News

December 5, 2012  Wed 11:23 AM CT

Tellabs popped last week, but one trader apparently thinks that what goes up may come down.

optionMONSTER's Depth Charge tracking program detected the purchase of about 1,800 December 3 puts for $0.05 against open interest of 882 contracts. Those puts lock in a selling price for the stock, so will appreciate in the event of a decline.

TLAB is flat at $3.37 in early afternoon trading but is up 17 percent in the last week. Most of the gains occurred on Friday, when the company announced that it would pay a giant special dividend of $1 per share.

Before that news came out, sentiment had been negative in the maker of telecom gear, which had been dropping since mid-2010 amid a stream of poor financial results. Today's trader apparently thinks the longer-term downtrend will continue after the recent pop.

Total option volume is quadruple the daily average in the name so far today, according to the Depth Charge.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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