Options Trading News

Illinois Tool Works has been ratcheting higher since its earnings announcement late last month, but one trader is positioning for a potential pullback.

More than 5,200 August 55 puts were bought late yesterday afternoon, most of them going for $0.20, according to optionMONSTER's Depth Charge system. Open interest in the strike was just 825 contracts at the beginning of the day, so these are new positions.

ITW rose 0.64 percent yesterday to close at $56.88, up about 12 percent since bouncing off a six-month support level around $50 three weeks ago. Shares are now sitting just below resistance that has been in place since early May.

The industrial product and equipment manufacturer initially fell under $52 after reporting earnings on July 24 but has been trending higher since then. The stock gapped higher last Friday after the company raised raising its quarterly dividend by 6 percent.

Our systems did not identify any stock trades tied to the put buying yesterday, though it could have been a hedge on a previously established long position. It could also be a straight bearish bet that the stock will be unable to punch through resistance and pull back roughly 3.7 percent by expiration at the end of next week. (See our Education section)

The trading pushed ITW's total option volume to triple its daily average in the last month. Puts outnumbered calls by about 3.5 to 1, a reflection of the bearish session.