Options Trading News

BHP Billiton bounced yesterday, but a large trade is positioning for a decline in the long term.

BHP gained 2.79 percent to close at $65.25, a day after trading to its lowest level since July 25 and not far from its the 2012 lows. Shares of the mining and energy company were above $70 only two weeks ago.

A trader bought 10,069 January 2014 60 puts for the ask price of $8.75 while selling the same number of January 2014 40 puts for the bid price of $2.40, optionMONSTER's systems show. The volume at each strike was more than the open interest at the start of the session, so this was a new vertical spread. (See our Education section)

The put spread cost the trader $6.35, which will be lost if shares are above $60 at that long-term expiration. The maximum gain of $13.65 will be realized if BHP is below $40 at that time.

Before then, however, the spread is very unlikely to have a full profit or loss. BHP hasn't been under $40 since coming off its lows of March 2009.

Our systems show that 24,627 BHP options traded overall, compared to a daily average of 3,900. Puts paced calls 11 to 1.