Bear anticipates Riverbed drying up

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Riverbed Technologies has been rallying hard since the summer amid takeover speculation, but now one trader is positioning for a reversal lower.

optionMONSTER's Depth Charge tracking program detected the purchase of 6,371 January 45 puts for $5.10. At the same time, similar-sized blocks were sold in the January 39 puts for $2.55 and the January 36 puts for $1.75.

RVBD The strategy, known as a bearish "Christmas tree," allowed the investor to own the January 45 puts for about $0.80, giving him or her significant leverage on a push to the downside. The position will earn a maximum profit of 650 percent if RVBD closes between $36 and $39 on expiration. The gains will erode below that range and turn to losses if the stock falls though $30.

The Christmas tree resembles a ratio spread because more options are sold than are purchased. It's different because two strikes are sold, rather than one.

RVBD climbed 4.95 percent to $46.45 in afternoon trading and is up 55 percent in the last three months. The provider of networking devices has been rallying on strong earnings and as investors speculate that it may be acquired in the wake of Hewlett-Packard's and Dell's bidding war over 3Par.

The next earnings release is scheduled for after the bell on Oct. 21.

Overall option volume in RVBD is 8 times greater than average today, with puts accounting for 89 percent of the activity.

(Chart courtesy of tradeMONSTER)




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.



This article appears in: Investing , Options

Referenced Stocks: DELL , HPQ , RVBD

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