Options Trading News

February 22, 2013  Fri 2:45 AM CT

U.S. Airways has been testing long-term highs, but one investor thinks it may to come back to earth.

optionMONSTER's Depth Charge tracking program detected the purchase of 10,000 June 14 puts for $2 and the sale of an equal number of June 10 puts for $0.28. Volume was more than twice open interest at both strikes, indicating that new money was put to work.

Known as a bearish put spread, the trade cost $1.72 and will earn a maximum profit of 133 percent if the Arizona-based airline closes at or below $10 on expiration. The investor may be using the strategy as a hedge on an existing long position or as a speculative bearish play. (See our Education section)

LCC rose 0.3 percent to $13.37 yesterday. It rallied strongly through early this year, touching its highest levels since February 2008. But it then formed a potentially bearish "head and shoulders" pattern, with a lower high two weeks ago, which could be leading some chart watchers to expect a reversal lower.

Total option volume was twice the daily average in LCC yesterday, according to the Depth Charge, with puts accounting for a bearish two-thirds 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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