Why traders are buying puts in Guess
Mike Yamamoto | [email protected]
More than 4,400 September 32 puts traded in a strong buying pattern as premiums rose from $1.50 to $1.87 in a little more than an hour yesterday, according to optionMONSTER's Depth Charge tracking system. The volume was far above the strike's open interest of just 258 contracts before the session began, clearly showing that new positions were established.
These puts lock in the price where traders can sell the stock no matter how far it might fall, allowing them to hedge long positions or make an outright bearish bet. But they will expire worthless if GES remains above $32 through mid-September. (See our Education section)
GES fell 3.18 percent to $32.28 yesterday after climbing to $34.36 on Monday, its highest price in more than two years. The stock bounced off support around $24 in early April and is now bumping up against resistance in place since mid-March 2012.
The company has not yet scheduled its next earnings report, but last year's calendar suggests that results will come out later this month.
Total option volume in the name was just shy of 7,000 contracts yesterday, 22 times its daily average for the last month. Overall puts outnumbered calls by a bearish 11-to-1 ratio.