Options Trading News

February 27, 2013  Wed 4:14 AM CT

Medical device maker Cyberonics has been trying to rebound after falling sharply last month, but one trader remains cautious.

optionMONSTER's Depth Charge system shows that a trader sold 2,682 July 45 puts for $4.10 and bought the same number of October 45 puts for $5.50 yesterday. Volume was above open interest in the July strike but below it in the October contracts.

This indicates that the trader is rolling a long-put position to a later date, paying a net $1.40 to stay in the trade for an additional three months. These puts, which lock in the price where shares can be sold, could be a protective hedge on a long position or an outright bearish bet that the stock will fall by expiration in mid-October. (See our Education section)

CYBX rose fractionally yesterday to close at $46.24, just below its 200-day moving average. The stock hit a 52-week high of $56.73 on Jan. 9 but then fell precipitously for several sessions, ending the month at $43.36. The company regained some of that ground on Friday when it gapped higher after beating earnings and revenue estimates.

The put roll made up almost all of the 5,726 options that traded in the name yesterday, volume that was more than 17 times its daily average for the last month. Only 12 calls changed hands in the entire session.
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Timing the Trade

Both break outs and a break downs need to have a couple things happen before it is considered a confirmed break out or break down by technical definition!  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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