OptionsHouse

Options Trading News

January 3, 2013  Thu 3:16 AM CT

PAY: SEE CHART GET CHAIN FIND STRATEGIES
VeriFone has lost nearly half its value since reaching its 2012 high in the spring, and one trader is positioning for more potential downside.

More than 2,000 April 26 puts traded in a strong buying pattern yesterday, almost all of them going for $1.20, according to optionMONSTER's Depth Charge system. The volume was about 15 times higher than the strike's open interest of 132 contracts at the start of the session, clearly indicating new activity.

PAY rose 0.24 percent yesterday to close at $29.75 but is down nearly 47 percent since its 52-week high of $55.89 in mid-April. The maker of credit-card readers tried to break out of a multi-month range early this month but gapped back down on Dec. 14 after quarterly revenues missed estimates.

The puts bought yesterday, which lock in the price where traders can sell shares, were not tied to any stock trades identified by our systems yesterday. They could either be a hedge on a previously established long position or a straightforward bet that PAY will fall roughly 17 percent by mid-April. Either way, the puts will expire worthless if the stock is above the $26 strike price by that expiration. (See our Education section)

The trade pushed total option volume to 5,643 in the name, more than double its daily average of 2,625 for the last month. Puts outnumbered calls by nearly 2 to 1.
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

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.

View more education articles »