Options Trading News

January 29, 2013  Tue 11:06 AM CT

Tractor Supply reports earnings tomorrow night, and the bears are stepping in.

optionMONSTER's Depth Charge monitoring program detected the purchase of about 1,600 February 95 puts against open interest of just 170 contracts. Most of the large blocks priced for $3.80 to $4.20.

Those puts lock in the price where investors can sell shares in the farm-supply retailer. They can generate some nice leverage in the event of a selloff but will also lose value if it climbs or moves sideways. The trader could be taking a speculative short bet on the stock or may be looking to protect a long position. (See our Education section)

TSCO is off 1.38 percent to $93.43 in midday trading and has mostly fluctuated between $84 and $100 in the last year. The stock is sitting near its 200-day moving average. If it rolls over at the current level, it would mark a lower high and could make chart watchers expect a sharper selloff.

The last quarterly report in October was mixed, with profit above expectations but revenue weak. Same-store sales growth also slowly sharply from a year earlier.

Total option volume is almost 10 times greater than average today, with puts dominating the activity.
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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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