Options Trading News

January 4, 2013  Fri 5:16 AM CT

Fortinet fell hard last quarter, and the bears came back yesterday.

optionMONSTER's Depth Charge tracking system detected unusual activity in the January 20 puts shortly after the open, with buyers paying $0.25 to $0.30. More than 3,600 contracts traded by the end of the session, far above the strike's previous open interest of just 244 and therefore new positions.

Puts lock in the price where investors have the right to sell stock, so the options can generate some nice leverage in the event of a decline. That happened nicely yesterday because those puts more than tripled in value to $1.20 as the network-security stock pushed lower. (See our Education section)

FTNT fell 8.78 percent yesterday to close at $19.33. The stock gapped lower on Oct. 16 after the company cut its guidance, then rolled over after attempting to rebound in November and December.

Total option volume was 32 times greater than average in the name. There was also heavy call volume, but most of those were sold, which reflects a belief that upside will be limited.

(A version of this post appeared on InsideOptions Pro yesterday.)
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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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