What's behind put buying in Alcoa
Mike Yamamoto | firstname.lastname@example.org
optionMONSTER's Depth Charge system shows that a trader bought 12,593 January 7 puts in two prints for $0.19 and $0.20 yesterday. The volume was above the strike's previous open interest of 10,272 contracts, so this is a new position.
These puts, which lock in the price where the stock can be sold no matter how far it might fall, can be used to hedge a long-stock position or to make an outright bearish bet. Either way, they will expire worthless if AA stays above $7 through mid-January. (See our Education section)
AA began yesterday in the red but rebounded sharply in the afternoon to finish the session unchanged at $8.16. The aluminum producer bounced off support below $8 last week but pulled back again after failing to break through its 100-day moving average. The stock hasn't traded below $7 since April 2009.
Total option volume in AA surpassed 47,000 contracts yesterday, more than triple its daily average for the last month. Overall puts outpaced calls by more than 2 to 1.