Options Trading News

January 31, 2013  Thu 9:08 AM CT

A relatively large put trade tops the action in Medifast as the stock is near six-month lows.
The 5,000 MED options have traded so far today constitutes unusual activity, as it averages volume of just 250 contracts a day for the last month.

A trader bought 2,500 March 22 puts for the ask price of $1.35 in a new position with volume that was 10 times the previous open interest at that strike. Seconds later, he or she sold 2,500 March 26 puts for $2.90 in volume that was below open interest of 2,625 at that strike.

This could be a credit spread but, given the action and the stock price, it appears far more likely to be a roll. In the latter case, the trader would be closing the higher-strike position and rolling the position down as the stock has slipped. (See our Education section)

MED is up 4.17 percent to $24.72, but it was above $28 at the start of the week and above $32 in mid-December. Yesterday's close was its lowest since the weight-management company gapped higher in late July.
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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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