Options Trading News

July 10, 2014  Thu 4:45 AM CT

Pandora Media has fallen sharply, and traders think more downside is coming.

optionMONSTER's Depth Charge monitoring program detected the purchase of 6,000 December 26 puts for $3.75. An equal number of December 29 puts was sold for $5.40, but the volume was below the previous open interest in that strike. This suggests that an existing position was closed and rolled to a lower strike.

These puts lock in the price where shares can be sold in the online music company, so they appreciate when the stock falls. Yesterday's trader probably bought the December 29s when P was higher, then made money and is now adjusting down to the 26s. He or she collected $1.65 and remains positioned to profit from further declines. (See our Education section)

P rose 0.19 percent to $25.84 yesterday but is down 11 percent in the last week. It followed a decline in other e-commerce names such as LinkedIn and Twitter after hitting resistance at its 200-day moving average.

Pandora gapped down on a weak earnings report in April. The next set of numbers is due July 24.

Total option volume was slightly above average in the name yesterday, with puts outnumbering calls by a bearish 3-to-1 ratio.
Share this article with your friends


Premium Services

Education & Strategy

The art of trading

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.

View more education articles »