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.
Share this article with your friends


Premium Services

Archived Webinar

Education & Strategy

The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

View more education articles »