Options Trading News

Timken has bounced in the last week, but option activity remains negative today.

Our Depth Charge monitoring system detected the purchase of 3,000 August 42.50 puts for $1.73 and the sale of an equal number of August 37.50 puts for $0.49. Volume was below open interest in the 37.50s, so there are two possible explanations for the transaction.

One is that an existing position in the lower-strike contracts was closed and rolled up after the shares climbed. Alternatively, both halves may have been opened. In that case, it would have been a bearish put spread with a cost of $1.24 and a maximum potential profit of more than 300 percent if the industrial stock closes at or below $37.50 on expiration. (See our Education section)

TKR is up 1.7 percent to $44.75 in afternoon trading and has appreciated almost 9 percent in the last five sessions. The supplier of products used in machinery is scheduled release earnings next Thursday, July 26, before the bell. The last release in April beat expectations and guidance was strong.

Overall option volume in the name is quadruple the daily average so far today, with puts outnumbering calls by more than 300 to 1.