Market News

August 22, 2013  Thu 2:45 AM CT

Globe Specialty Metals popped after its earnings report yesterday, and one trader is looking for the stock to hold current levels.

optionMONSTER's tracking systems detected the sale of 2,000 December 12.50 puts in one print for the bid price of $0.80. This is clearly a new position, as open interest in the strike was just 72 contracts before the trade appeared.

The put seller will keep the $0.80 credit as profit if GSM stays above $12.50 through mid-December. If it falls below that level, the trader will be on the hook to buy shares at an effective price of $11.70 once that credit is included. Traders sometimes sell puts this way in hopes of picking up the underlying stock at a discount. (See our Education section)

GSM produces silicon alloys used by chemical, aluminum, and semiconductor companies. It beat quarterly earnings forecasts yesterday but fell short on revenues.

The stock briefly broke above its 200-day moving before settling back at $12.80, still up 2.07 percent on the day. Shares had been declining steadily since trading above $15 in mid-February but have been grinding their way higher after finding support around the $11 level in early July.

Yesterday's put sale made up almost all the volume in GSM, which has seen only 23 options trade per day on average for the last month.
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Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

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