Options Trading News

One big investor is throwing in the towel on copper, positioning for downside in an obscure security that tracks the red metal.

optionMONSTER's Depth Charge tracking program detected the purchase of 1,000 July 43 puts on the iPath Dow Jones UBS Copper exchange-traded note for $2.80. Equal-sized blocks were sold in the July 45 calls for $0.80 and the July 38 puts for $0.50. There was no open interest in any of those contracts before the trade appeared, so it is a new position.

The investor paid $1.50 and will earn a maximum profit of 233 percent if the JJC closes at or below $38 on expiration. The trader will be forced to sell the stock for $45 if it goes above that level, so the options are probably being used to protect a long position.

The JCC fell 0.59 percent to $42.82 yesterday and has lost 13 percent of its value in the last month. A slowing global economy has weakened demand for copper and worsened sentiment toward the metal, which is often used as a proxy for construction and capital expenditures.

The JJC bounced near $38 last October, so yesterday's option trader may be worried about a test of that low. The strategy combined elements of a collar trade with a vertical put spread. (See our Education section)

Overall option volume in the note was 67 times greater than average in the session.