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April 16, 2013  Tue 3:47 AM CT

SHLD: SEE CHART GET CHAIN FIND STRATEGIES
Put buying topped the options trade in Sears Holdings as the stock tumbled yesterday.

More than 22,000 SHLD options traded, compared to a daily average of 2,300. Puts outpaced calls by 2 to 1, and topping the action was one print in the January 2015 30 puts.

optionMONSTER systems show that 11,111 changed hands as a trader bought a single block of 9,000 of those puts for the ask price of $3.90. This is clearly a new position, as open interest in the strike was just 382 before the session began.

The puts may have been tied to a long stock position as a protective hedge or a long-volatility play. But given the market action and how far out of the money these puts are, this could be a simple bearish position that is betting on levels not seen since the beginning of 2012. (See our Education section)

SHLD was down 6.8 percent to close at $48.70 yesterday. The department-store operator reached its highest level since mid-November in the morning, but yesterday's losses gave up gains of the last six weeks.
  
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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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