Market News

January 10, 2014  Fri 3:16 AM CT

A large put trade is positioning for a potential pullback in WisdomTree Investments.

optionMONSTER's Depth Charge system shows that a trader bought 5,000 March 17.50 puts for the ask price of $1.45 and sold 10,000 March 15 puts for the bid price of $0.45. This is clearly new activity, as previous open interest at each strike was below 900 contracts.

The trade is a ratio spread designed to profit from a limited drop in shares of the financial company, which operates exchange-traded funds. The maximum profit would come with the stock around $15 at expiration in mid-March, but below that level the trader would be on the hook to buy shares. (See our Education section)

WETF rose 0.63 percent yesterday to close at $17.46. The stock reached an all-time high of $18.22 on Tuesday but was down at $15 only a month ago.

Yesterday's put spread made up the bulk of WETF's total volume of 15,709 options, which is 10 times its daily average for the last month.
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Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

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