Bearish Gannett (GCI) trade boosts put volume


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Shares of Gannett Co. Inc. (NYSE: GCI ) gained more than 1% during afternoon trading without any notable news on the newspapers company. One investor appears to have taken a bearish position on the stock and was willing to commit a hefty amount of capital to call for downside.

GCI closed up 13 cents to $12.73 on Tuesday. The stock is trading roughly 35% lower than its 52-week high of $19.69 reached in April. GCI did not announce any news on Tuesday, and has not confirmed its next earnings announcement. The market expects the company's next report on or around Oct. 19. On July 16, GCI announced earnings of 61 cents per share and beat estimates by eight cents.

The October 12 puts were active during Tuesday's trading thanks to an investor who paid roughly 90 cents per contract to open a 5,000-lot of these near-the-money options. Current open interest in this line is 2,400 contracts. A look at time and sales shows the investor traded these options outright, meaning the investor is betting that GCI shares will be trading lower than $11.10 at October options expiration (Oct. 15). If the stock drops at least 13% during the near term, this position will turn profits and continue to do so as the stock nears zero. If GCI shares are trading higher than the strike price, the investor loses a maximum of the premium paid per contract (the total maximum loss is $450,000).

The investor breaks even if GCI shares are trading at $11.10 at expiration. Keep in mind that October is not only the earnings month for GCI but also will be the front-month when these options expire. At least one investor is betting volatility will increase and put downward pressure on the stock during the next couple of months.

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

This article appears in: Investing , Options

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Jud Pyle

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