Market News

October 19, 2016  Wed 9:32 AM CT

A large position is betting that downside potential will be limited in Applied Materials.

optionMONSTER's monitoring systems show that 6,800 Weekly 26.50 puts expiring on Nov. 25 were sold in one print for $0.52 today. This is clearly a new position, as open interest in the strike was a mere 5 contracts before the trade occurred.

Short puts lock in a price where investors must buy a stock, while letting them collect premium. Traders use the technique when they like a stock and think that the risk of a big drop is limited. (See our Education section)

AMAT is up 0.25 percent to $28.09 in morning trading but is down 8 percent in the last month. The chip-equipment maker is expected to report earnings after the close on Nov. 17.

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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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