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December 27, 2012  Thu 3:16 AM CT

JNY: SEE CHART GET CHAIN FIND STRATEGIES
The Jones Group has fallen about 25 percent in the last two months, but one trader apparently believes that the bloodletting is about done for the apparel company.

optionMONSTER's systems show that 3,000 January 10 puts were sold for $0.25 in less than 3 minutes yesterday. This is a new position, as there was no open interest in the strike before the session began.

JNY dropped 3.75 percent to $10.52 yesterday as many retailers fell after the industry received weak holiday-shopping estimates in the morning. The stock hit a double top at 52-week highs just under $14 in September and October, and it is now trading back down to levels from early August.

The put seller is looking for the stock to close above the $10 strike price at expiration on Jan. 18. The trader will face the obligation to buy the stock if it is below that level, for an effective price of $9.75 when the credit from the put sale is included. (See our Education section)

The trade made up the bulk of JNY's 3,325 total option volume yesterday. The name has averaged just 81 contracts per session for the last month.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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