Crash protection on Conn's

By David Russell,

Shutterstock photo

Conn's reports earnings tomorrow, and someone is worried about a major crash.

optionMONSTER's Depth Charge monitoring program detected the purchase of about 5,900 April 25 puts for $0.30 and $0.35. Previous open interest stood at just 744 contracts before the trade appeared, so new positions were clearly initiated.

Because they lock in the level where a stock can be sold, puts move in the opposite direction as the share price. Investors use them to hedge long positions or to wager on a selloff. (See our Education section.)

CONN fell 1.10 percent to $34.09 yesterday. Once a high-flying appliance retailer, the company has recently struggled with losses on consumer loans. Those troubles have erased more than half its value since the start of the year.

Two of the last three quarterly announcements have triggered major selloffs, and now investors fear the same thing may happen again Thursday morning.

Overall option volume was 6 times greater than average in the session, according to Depth Charge. Puts accounted 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.

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

This article appears in: Investing Options
Referenced Stocks: CONN

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