Put strategy adjusted after USG drop
David Russell | firstname.lastname@example.org
optionMONSTER's tracking systems detected the purchase of about 8,000 May 15 puts for $0.95 and the sale of equal number of June 14 puts were also sold for $1.05. Volume was below open interest in the May contracts but not in the Junes, suggesting an existing short position was rolled from one strike to the other.
USG is off 0.78 at $13.93, continuing to fall from over $16 on Monday. The investor had probably sold the May 15 puts recently, looking to earn income from the stock holding its ground above $15. But now that it's fallen below that level, he or she would be forced to buy shares for $15 at the close.
Adjusting the position to June forestalls that possibility, and lowers the price by $1. They collected a credit of $0.10 in the process, but also have committed to remain in the position for an additional month. (See our Education section)
USG, which makes wallboard, rallied early in the year along with most other housing-related stocks. Earnings and revenue beat expectations the last time results were released on April 17, following several quarters of weak results.
Overall option volume is quadruple the daily average so far today.