Options Trading News

October 8, 2013  Tue 4:14 AM CT

The action is turning cautious in Adtran with earnings coming out this afternoon.

optionMONSTER's Depth Charge monitoring system detected the purchase of about 2,000 October 27 puts for $1.05 to $1.25. Volume was more than 12 times open interest at the strike, indicating that a new position was initiated.

The investor has the right to sell shares in the networking-technology company for $27 over the next two weeks no matter how low they may drop in that time. They'll appreciate to the downside, generating potentially significant leverage in the event of a selloff. The buyer could be using the contracts to protect a long position in the stock or to speculate on a drop. (See our Education section)

ADTN rose 0.78 percent to $26.98 yesterday and is up 38 percent so far this year. Its last two quarterly reports beat expectations. The stock is back around a level where it bounced in 2011 and then gapped lower in 2012, which could make some chart watchers think that it's now resistance.

Total option volume was 34 times greater than average in the session, according to the Depth Charge.
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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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