Sina Corp. (NASDAQ: SINA )
, a Shanghai-based online media company, did not announce any news
on Monday, but heavy put volume out of the gate suggests at least
one investor anticipates a possible slide in the stock.
SINA shares were down 88 cents, or more than 2% around 1 p.m.
EST, to $36.82. The majority of the online media sector was also
down on the day, but SINA was one of the worst performers without
any news from the company. SINA has not announced its next earnings
release date, but the market expects the report around June 9.
Options action out of the gate suggest investors are looking for
downside, and are buying options with June expiration because those
options will be closest to the earnings event.
By 12 p.m. EST, several large blocks totaling more than 5,200
) June 32 puts changed hands for a premium of 55 cents per
contract. These puts are home to current open interest of 5,000
contracts and are currently up more than 15 cents on the day. The
puts have an implied volatility of 39% compared to the stock's
30-day historical volatility of 26%. Investors who traded these
later-dated puts to open will make money if SINA shares drop lower
than $31.45 throughout the next 60 days prior to June options
expiration. Theoretically, investors could make significant profits
if the stock drops all the way to zero. On the other hand, if the
stock stays higher than the breakeven price, this long put trade
caps any losses at the premium paid, or 55 cents per contract.
Long put strategies perform optimally if the stock declines, but
options investors maintain a different risk profile than just being
short the shares. Build a profit/loss graph of this long put
position by opening a free
virtual trading account
, something I use every day to manage risk and assess reward.
Heavy put-buying action such as this is not a sufficient case to
turn bearish on SINA. But if the action was initiated to open, at
least one investor expects SINA for downside to continue in SINA,
potentially sending the stock toward the low levels we saw last