Options Trading News

November 16, 2012  Fri 9:19 AM CT

Ferrellgas has been dropping, and one bear wants to ride the shares lower.

optionMONSTER's Depth Charge tracking system detected the purchase of 2,000 February 17.50 puts for $3.60 and the sale of an equal number of November 17.50 puts for $1.90. Volume was below open interest in the November options but not in the February puts, indicating that an existing position was rolled from one contract to the other.

FGP is up 0.22 percent to $15.74 in morning trading but has lost 12 percent of its value in the last month. The propane stock is now below the $17.50 strike price, leaving those puts in the money. Given that they expire today, the investor rolled the trade to prevent themselves from being assigned a short position in the name.

Instead, the trader will remain exposed to further downside in the stock, but with limited risk to suffering losses in the event of a rally. Adjusting the trade cost $1.70. (See our Education section for more on how trading options can be safer than buying and selling shares.)

FGP normally trades fewer than 700 contracts in a session, but volume is almost 6 times that amount already today. Puts outnumber calls by more than 1,000 to 1, according to the Depth Charge.
Share this article with your friends


Premium Services

Education & Strategy

The art of trading

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.

View more education articles »