Options Trading News

October 1, 2012  Mon 12:22 PM CT

Investors are getting nervous about SAP as the stock pulls back from multi-year highs.

optionMONSTER's Depth Charge monitoring program detected the purchase of more 3,800 October 70 puts for $1.03 to $1.40. Volume was more than double previous open interest at the strike, indicating that new money was being put to work.

The traders have locked in the right to sell shares in the German software giant for $70 if they close below that level on expiration. Owning the puts allows them to protect a long position in the name or to bet on a drop without having to short the stock.(See our Education section for more on how options can be used to manage risk.)

SAP is down 1.07 percent to $70.57 this afternoon but is up 19 percent in the last three months. The shares touched $73.86 late last month, their highest price since the tech bubble burst in early 2000.

The company has repeated issued strong quarterly reports, with the next release scheduled for October 24. That's almost a week after the puts bought today expire.

Overall option volume is quadruple the daily average so far today, according to the Depth Charge. Puts outnumber calls by 70 to 1.
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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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