Options Trading News

September 30, 2013  Mon 3:47 AM CT

One trader is positioning for a pullback in mobile-chip maker ARMH Holdings.

About 3,000 November 50 puts were purchased for the ask price of $3.40 in less than 4 minutes late Friday, according to optionMONSTER's Depth Charge tracking system. This is clearly a new position, as open interest was a mere 15 contracts before the trade appeared.

The put buyer is looking for ARMH to drop below $46.60 in the next seven weeks. But the contracts will quickly lose value if shares don't fall, and they will expire worthless if the stock is above $50 in mid-November.

These puts will track the share price closely because they are in the money. This suggests that the trader is making an outright bearish bet, rather than hedging a long position. (See our Education section)

ARMH slipped 0.39 percent on Friday to close at $48.86 but is still at its highest levels since May. The U.K.-based company had been trading sideways since falling sharply after its second-quarter earnings report in late July, but it broke out of that range on Sept. 10 on news that its A7 chip was being used in Apple's new iPhones.

Friday's put buying pushed the total option volume in ARMH to about 4,200 contracts, 7 times its daily average for the last month. Overall puts eclipsed calls by 4 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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