Options Trading News

February 25, 2013  Mon 11:53 AM CT

CenturyLink has tried to bounce after a nasty drop, but the momentum bears are coming back.

optionMONSTER's Depth Charge tracking program detected the purchase of 7,835 July 35 puts for $2.45 and the sale of an equal number of July 35 calls for $1.15. Volume surpassed open interest at each strike, indicating that new positions were initiated.

The trade cost $1.30 and is similar to short selling the Louisiana telecom for $28.70. If CTL drops, the puts owned will appreciate in value, while the calls sold short will dwindle. The opposite will happen to the upside. (See our Education section for more.)

CTL is down 0.4 percent to $34.50 in afternoon trading and has lost 14 percent of its value in the last month. Most of that drop occurred on Feb. 14 after quarterly results lagged estimates and management lowered the company's dividend.

The stock has tried to rebound since then but has remained trapped below $35. That could be leading some traders to believe that this level is now resistance.

Today's bearish trade dominates the options activity in the name today, accounting for more than 80 percent of today's volume.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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