Options Trading News

May 31, 2013  Fri 9:29 AM CT

A large trade is positioning for potential drop in shares of United Continental.

optionMONSTER's Depth Charge system detected the purchase of 5,000 July 27 puts in about 2 minutes this morning, led by a print of 4,343 that went for $0.38. This is clearly fresh buying, as open interest in the strike was a mere 3 contracts before the session began.

The puts lock in the price where traders can sell the stock no matter how far it might fall, but they will expire worthless if UAL remains above $27 by expiration in mid-July. These options, which weren't tied to any stock trading identified by our systems today, could have been bought as a protective hedge on a long position established earlier or as a straight bearish bet. (See our Education section)

UAL is down 0.74 percent to $32.40 this morning. The airline carrier has been trending lower since hitting $35.27 on May 20, its highest level since February 2008.

Total option volume in the name is already more than 7,100 contracts, surpassing its full-day average of 6,366 contracts less than an hour into the session. Puts outnumber calls by 31 to 1, a reflection of the bearish sentiment.
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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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