Market News

August 1, 2012  Wed 11:15 AM CT

Masco fell sharply yesterday after disappointing second-quarter results, but one trader apparently believes that the selling has been overdone.

More than 11,000 September 12 puts traded in a strong selling pattern in less than 5 minutes, according to optionMONSTER's tracking systems. Open interest in the strike was just 446 at the beginning of the day, so this is clearly new activity.

The put selling represents a bet that the stock will hold above the $12 strike price through expiration on Sept. 21. The trading pushed overall option volume in the name to nearly 7 times its daily average for the last month.

MAS is down 0.67 percent to $11.95 in early afternoon trading. The manufacturer of home-improvement and building products missed earnings and revenue estimates Monday night, citing higher costs and weakened demand, and gapped down from above $13 the next morning. (See our Education section)
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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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