Trader seeks protection in SolarWinds
David Russell | email@example.com
optionMONSTER's Depth Charge monitoring program detected the purchase of 1,500 June 45 puts for $1.90 and the sale of an equal number of March 45 puts for $0.25. Volume was below open interest in the March contracts, indicating that a position was rolled forward in time.
The investor probably owns shares in the company and is using the puts as a hedge. Adjusting the trade provides an additional three months of downside protection at an incremental cost of $1.65. (See our Education section)
SWI tripled in value between September 2011 and September 2012 but has been hovering in a range since. The enterprise-software maker fell 5.19 percent to $53.01 yesterday despite beating expectations in fourth-quarter results.
Earnings have been consistently strong, but they've been exceeding consensus by narrowing margins. That could make be leading some traders to think that all the good news is already priced into the stock.
Overall option volume was 16 times greater than average, according to the Depth Charge. Puts accounted for a bearish 80 percent of the total.