Why trader is selling puts in Renren
Chris McKhann | email@example.com
RENN, often described as a Chinese version of Facebook, is down 3.2 percent to $4.54 this afternoon. Shares traded above $7.50 in mid-April and have seen a couple of big losing days, including a huge drop on May 18.
A trader sold a block of 10,000 July 5 puts for bid price of $0.90, according to optionMONSTER's systems. The volume was roughly twice the previous open interest, so this is a new position.
On its surface, the put selling appears to be a bet that RENN will be above $5 by that July expiration. But the trader may actually be hoping for the stock to fall so that he or she can buy the stock at a discount to current prices. Subtracting the credit from selling the puts, the effective price would be $4.10. (See our Education section)