Options Trading News

February 26, 2013  Tue 3:16 AM CT

Aflac is down sharply this month, and traders are positioning for another leg lower.

optionMONSTER's Depth Charge system shows that 2,350 March 49 puts traded in a strong buying pattern yesterday as premiums more than doubled from $0.52 to $1.12. The volume was more than 5 times higher than the open interest in the strike before the session began, indicating that these are new positions.

The puts, which lock in the price where traders can sell shares no matter how far they might fall, were not tied to any stock action identified by our systems yesterday. These options could have been bought as a protective hedge on a long position established earlier or as an outright bearish bet that the stock will drop further by expiration on March 15. (See our Education section)

AFL fell 2.38 percent yesterday to close at $48.88. The insurance company had rallied for months and was trading near $55 in mid-December but gapped down on Feb. 6 after its fourth-quarter report, breaking below its 50- and 100-day moving averages.

The company will present at the Raymond James Annual Institutional Investors Conference next Monday. It is scheduled to release first-quarter earnings on April. 24.

Total option volume in the name reached 8,225 contracts yesterday, more than double its daily average in the last month. Puts outnumbered calls by more than 2 to 1.
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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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