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February 14, 2013  Thu 2:47 AM CT

BHP: SEE CHART GET CHAIN FIND STRATEGIES
Traders are positioning for a potential drop in BHP Billiton.

More than 5,100 March 75 puts traded in a strong buying pattern yeterday as premiums rose from $0.87 to $1.02, according to optionMONSTER's Depth Charge tracking system. The volume was 9 times higher than the strike's open interest of 579 contracts at the beginning of the session, clearly showing that these are new purchases.

The puts weren't tied to any stock trading identified by our systems yesterday, though they could have been bought as a protective hedge on a long position established earlier. These options, which lock in the price where traders can sell the stock no matter how far it might fall, could also be making an outright bearish bet that BHP will trade below $75 in the next month. (See our Education section)

BHP rose 1.29 percent to $78.53 yesterday. The Australia-based energy and mining company had rallied strongly from about $68 in mid-November to a 52-week high above $80 at the beginning of the year, but it gapped lower on Jan. 11 after downgrades from Macquarie and Bank of America / Merrill Lynch. Shares have been trading mostly between $76 and $79 since then.

Total option volume in the name was 7,360 contracts yesterday, nearly triple its daily average for the last month. Puts outnumbered calls by more than 5.5 to 1.
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Options Academy: Ron's Risk Calculation--A Real Life Example

It is rare that I get a chance to give a real-life, real-time example in my articles that the readers were not only following but were actually involved in at the time the event is happening. Well, that is where we are right now in our QQQ trade from last week. Let's recap the trade itself.

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