What's behind put buying in Seagate
Mike Yamamoto | [email protected]
optionMONSTER's Depth Charge tracking system shows that 2,000 January 30 puts traded in a strong buying pattern in less than 2 minutes this morning, led by a block of 1,462 that went for $0.57. Open interest in the strike was just 44 contracts at the start of the session, so this is clearly a new position.
STX is off 0.3 percent to $30.12 today. The computer hard-drive maker had been trending steadily lower since August but bounced strongly at the $25 level at the beginning of this month. The stock gapped above its 100-day moving average on Dec. 19 but has been trapped below resistance around $30.50 that has been in place since early October.
Today's puts were not tied to any stock trading identified by our systems, but they could have been purchased as a hedge on a long position established earlier to protect recent gains. These options could also be making a straight bearish bet that STX will fall roughly 2.5 percent by expiration in three weeks. Total puts in the name are outpacing calls by about 5 to 1 so far, a reflection of the bearish sentiment. (See our Education section)
Seagate and arch-rival Western Digital have seen bullish option activity this month as the sector continues to recover from the devastating 2011 floods in Thailand, where an estimated one-third of the world's hard drives are produced.