Bearish spread takes aim at Conn's


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Conn's last earnings report was a stinker, and the bears are bracing for another setback.

optionMONSTER's Depth Charge monitoring system detected the purchase of 2,000 December 55 puts for $3.65 and the sale of a matching number of December 45 puts for $1.05. Volume exceeded open interest at both strikes, indicating that new positions were initiated.

Known as a bearish put spread , the trade cost $2.60 and will expand to $10 if the electronics retailer closes at or below $45 on expiration. That would be a profit of 285 percent. (See our Education section for more on how to generate leverage with options.)

CONN is down 3.88 percent to $57.72 in morning trading. It hit an all-time high of $69.32 in early September but gapped lower after customer delinquencies hurt results at its credit segment. Timing for the next quarterly release hasn't been announced yet, but last year's calendar suggests it will occur in early December. So that downside spread could be the work of an investor looking to hedge a long position against a poor set of numbers.

Overall option volume is quadruple the daily average, according to the Depth Charge. Puts account for a bearish two-thirds of the total.

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

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This article appears in: Investing , Options

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