Lender Processing Services is trying to fight its way higher,
but one bear wants to pounce.
optionMONSTER's Depth Charge monitoring program detected a surge of
activity in the mortgage-service stock, which lost more than half
its value between April and October. All the trades occurred in a
five-minute span late Friday, suggesting that it was the work of a
single large institutional investor.
He or she bought 4,500 March 17 puts for $2.10 and sold an equal
number of March 20 calls for $1.75. Similar to shorting the stock,
that position will profit from a drop but can lose money if LPS
rallies, so the trader also bought 4,500 March 25 calls for $0.60
to hedge the upside risk.
Shortly after, 9,261 December 17 puts were sold for $0.70 and 3,392
December 13 puts were bought for $0.30. Unlike in the March
contracts, both of those trades were less than open interest, which
suggests that an existing
bearish put spread
The activity resulted in a cost of about $119,000 and stands to
earn significant profits if LPS rolls over and heads below $17. It
can lose an additional $2.25 million if LPS rallies to $25.
The stock rose 0.48 percent to $18.80 on Friday, and has
appreciated by about 35 percent in the last month. It declined
along with other financials for most of 2011, but results beat
expectations the two last times it reported in July and October.
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The stock is now back to the same level where it bounced at the
darkest days of the mortgage crisis in November 2008. Some chart
watchers may now be looking for that support to become resistance,
followed by new lows, which may be the rationale behind last week's
Overall option volume was more than 80 times greater than average
in the session, according to the Depth Charge.