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November 13, 2013  Wed 10:23 AM CT

BHP: SEE CHART GET CHAIN FIND STRATEGIES
A trader is positioning for further declines in BHP Billiton 

optionMONSTER's Depth Charge tracking system shows that 4,485 December 67.50 puts were bought in one print for $1.17 this morning. This is clearly a new position, as open interest in the name was just 138 contracts before the trade appeared.

These puts could have been purchased as a hedge on a long position or as an outright bearish play. Either way, they will expire worthless if the stock stays above $67.50 through mid-December. (See our Education section)

BHP is down 0.92 percent to $69.62 near midday trading. The Australian mining company gapped above $72 after releasing quarterly numbers last month but has since given up those gains.

Total option volume in the name exceeds 9,100 contracts so far today, already more than triple its daily average for the last month. Overall puts outnumber calls by 6.5 to 1.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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