Why Huntsman is facing nervous trade
David Russell | [email protected]
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.