Market News

October 14, 2016  Fri 10:16 AM CT

Traders are positioning for another potential drop in Five Below.

optionMONSTER's monitoring system detected the purchase of 3,000 November 36 puts for $0.95 to $1.01. Volume surpassed open interest of 647 contracts, an indication new money was put to work.

Long puts lock in the price where a stock can be sold, so they make money if shares decline. Investors use them to hedge long positions or to speculate on a drop. (See our Education section)

FIVE is off 1.13 percent to $37.67 in morning trading and is down 20 percent in the last three months. The discount retailer's next quarterly results are expected to be released after the close on Dec. 1.

Overall option volume is 3 times greater than average so far today. Puts outnumber calls by a bearish 13-to-1 ratio.

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Education & Strategy

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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