Options Trading News

January 18, 2013  Fri 11:13 AM CT

Huntsman has dropped from a 52-week high, and one investor is apparently worried that a steeper correction may be in store.

optionMONSTER's Depth Charge tracking program detected the purchase of more than 19,000 May 12 puts, with the largest block pricing for $0.20. Volume was almost 24 times the strike's open interest before today's trading began, so this is clearly a new position.

The trader now has the right to sell shares in the chemicals company for $12, no matter how far they fall. Even if HUN doesn't drop that far, the value of the puts will appreciate. If the selling becomes frenzied, implied volatility will also increase and drive up the premium of the puts.

HUN is down 0.85 percent to $17.54 in early afternoon trading. The stock is up 57 percent in the last year as higher selling prices have allowed the company to consistently beat earnings estimates. Shares are now back near a key support level from 2011, which could be leading some traders to believe that it will now encounter resistance.

Total option volume is more than quadruple the daily average so far today, with puts outnumbering calls by more almost 16 to 1.
Share this article with your friends



The fastest money in the market
View full report »

Premium Services

Education & Strategy

The art of trading

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.

View more education articles »