BroadSoft earnings key to bearish bet
David Russell | firstname.lastname@example.org
optionMONSTER's Depth Charge monitoring system detected the purchase of 3,300 August 20 puts for $0.61 and the sale of an equal number of September 30 calls for $1.11. Volume was more than 6 times open interest at each strike.
The activity is unusual because the trader sold longer-dated calls than the puts purchased. That allows him or her to collect a credit of $0.50 and gives the position an unusual performance profile.
The trade is leveraged to the downside in the next three weeks, so it is apparently targeting the release of second-quarter results after the bell on Aug. 6. The last report in May included a weak profit forecast, which erased more than one-fifth of the stock's value in a single session.
BSFT rose 4.6 percent to $24.55 yesterday but seems to be hitting resistance at its 50-day moving average. That could be leading some chart watchers to think that it will continue to trend lower.
While the bearish aspect of yesterday's trade lasts only until August expiration in a few weeks, the short calls remain in effect until Sept. 21. As a result, the investor is obligated to sell shares for $30 if they close above that level. (See our Education section)
More than 7,100 contracts traded in the name during the session, more than 50 times its daily average.