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May 7, 2013  Tue 10:36 AM CT

PETM: SEE CHART GET CHAIN FIND STRATEGIES
PetSmart has been trying to rebound from a drop in March, but the bears are looking for a drop.

optionMONSTER's Depth Charge tracking program detected the purchase of some 2,000 June 67.50 puts, most of which priced for $2.05. Volume was more than 8 times previous open interest at the strike.

The investor has locked in the right to sell shares for $67.50 in the next 2-1/2 months no matter how far they might fall during that period. He or she may be looking to protect a long position against a drop or simply speculating on a decline in the share price. (See our Education section)

PETM rose 0.46 percent to $68.26 near midday trading. Shares appreciated more than 400 percent between late 2008 and August 2012 and have been drifting in a range since.

The pet-products retailer gapped lower on March 7 after issuing weak guidance and now appears to be making a lower high. That could be leading some chart watchers to believe that it's rolling over after that multi-year run.

Total option volume is almost quadruple the daily average, with puts outnumbering calls by a bearish 16 to 1.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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