Options Trading News

April 11, 2014  Fri 12:21 PM CT

Freescale Semiconductor is sitting at all-time highs, and someone is apparently afraid that it's going to roll over.

optionMONSTER's Depth Charge monitoring program has detected the purchase of about 7,600 May 24 puts, most of which priced for $1.30. Volume was more than 300 times previous open interest at the strike, which indicates that new positions were initiated.

Puts lock in the price where a stock can be sold, letting investors bet on a drop or hedge a long position. That way they can stay get short or stay long with limited risk. (See our Education section)

FSL is down 1.51 percent to $24.30 in afternoon trading but is up 52 percent so far this year. The chip maker exploded higher on a strong earnings report in late January and kept advancing until it hit $26 last week.

The stock made a lower high yesterday as the rest of the market came under heavy selling pressure, which could make some chart watchers fear that a bigger drop is coming next. The company's next earnings report is scheduled for April 24 after the closing bell.

Overall option volume is 14 times greater than average in FSL so far today, according to the Depth Charge, with puts accounting for a bearish 93 percent of the total.
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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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