NII faces puts as it attempts rebound
David Russell | [email protected]
The emerging-market telecom carrier is down more than 90 percent from its 2007 peaks but has been trying to rebound since early April. Yesterday it rallied 6.13 percent to $7.45, but puts dominated the option action.
optionMONSTER's Depth Charge monitoring system detected the purchase of almost 3,200 January 7 puts for $1.10. Volume was almost 8 times previous open interest at the strike, so new positions were clearly initiated.
Puts lock in the price where NIHD can be sold, giving them an inverse correlation to the share price. Investors use the contracts to hedge long bets on the stock or as an alternative to short-selling. (See our Education section)
NIHD has been a punching bag for the bears for years thanks to its hefty debt load and weak business operations. But the stock has been making higher lows since April as management divests assets and refinances debt. Short interest accounts for half the float, and the stock trades for less than book value.
Total option volume was 5 times greater than average in yesterday's session, according to the Depth Charge.