The bears want to shoot down aerospace giant General Dynamics,
which has rallied hard in recent weeks.
optionMONSTER's Depth Charge tracking system detected the purchase
of 12,500 January 65 puts for $0.60 and the sale of an equal number
of January 62.50 puts for $0.30. Volume exceeded open interest at
both strikes, indicating that new positions were initiated.
The trade cost $0.30 and will earn a maximum profit of 733 percent
if the stock closes at or below $62.50 on expiration. That would
represent a 10 percent drop in the next 3-1/2 weeks.
GD fell 0.62 percent to $69.04 yesterday but is up 11 percent since
mid-November. The shares appear to be rolling over around the same
level where they peaked early last month, which could be leading
some traders to expect a push lower with resistance in place.
Yesterday's trade, known as a
, is a common strategy to profit from such a belief. It generates
significant leverage by selling
contracts to lower the cost basis, but also has a high probability
of becoming worthless. (See our
Total option volume was 10 times greater than average in the
session, according to the Depth Charge. Puts outnumbered calls by a
bearish 52-to-1 ratio.
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