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December 20, 2012  Thu 3:16 AM CT

ZIP: SEE CHART GET CHAIN FIND STRATEGIES
As Zipcar tries to reverse its long slide, one trader is betting that the car-sharing company will hold onto recent gains in coming months.

optionMONSTER's systems found heavy selling in the May 7.50 puts, which saw 5,102 contracts change hands yesterday for an average price of $0.72. The volume was more than 9.5 times higher than the strike's open interest at the beginning of the day, so this is clearly new activity.

The put sellers are looking for ZIP to stay above $7.50 through expiration in mid-May. If it is below this level at that time, the traders will face the obligation to buy the shares at an effective average price of $6.78 once the credit from the put sales are factored in. (See our Education section)

ZIP gained 1.58 percent yesterday to close at $8.48 as it faces resistance that has been place for the last month. The vehicle-sharing network peaked at $31.50 when it went public in April 2011 but declined steadily until hitting an all-time low of $5.90 on Nov. 7. After its last earnings report a day after that low, however, the stock gapped higher and has been climbing since.

Yesterday's trading pushed total option volume in the name to 26 times its daily average for the last month.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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