Bears targeting Lender Processing


Lender Processing Services has been trending lower for almost a year, and the bears went after the name once again last week.

optionMONSTER's Depth Charge tracking program detected the purchase of about 8,000 December 30 puts, most of which priced for $1.20 and $1.25, against open interest of just 110 contracts.

The stock was sold heavily about two after the trades appeared, falling from about $32.50 to about $30.80. It would then rebound slightly but end Friday down 5.27 percent at $31.48.

LPS LPS, which provides software and services to the mortgage industry, peaked above $44 in October 2009 and has been making steadily lower lows and lower highs since then. The last time it reported earnings on July 22, management cut its full-year revenue forecast and issued a weak outlook for the third quarter.

It gapped lower on that news, made a new low, and then rallied back before rolling over once again. The fact that it only partly filled the July 22 gap before reversing could be interpreted by some chart watchers as evidence that the bearish trend remains intact.

LPS must fall another 9 percent by expiration for the puts to turn a profit.

It was the second straight day of downside activity in the stock. On Thursday about 9,400 March 30 puts were purchased for $2. Those same contracts appreciated to about $2.30 the next day.

Overall option volume in LPS was 24 times greater than average on Friday, with puts accounting for a bearish 99 percent of activity.

The next earnings report is scheduled for before the bell on Oct. 29.

(Chart courtesy of tradeMONSTER)

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

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

Referenced Stocks: LPS



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