Traders are buying insurance on Goodyear Tire & Rubber,
which has been running like a horse.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 2,000 November 22 puts for $0.95, along with the sale of 4,000
November 20 puts for an average premium of $0.305. Volume was more
than triple open interest at both strikes, indicating that new
positions were initiated.
The strategy is known as a
because twice as many contracts were sold as the number purchased.
That reduces their cost, but also creates an obligation to buy more
shares if the stock moves too much in the intended direction.
The trade--which cost $0.34 a share, or $68,000 in total--is
probably the work of an investor looking to hedge a long position
in the tire maker. He or she collects $2 a share, or $400,000, if
it drops to $20. Gains stop below that level, and the the trader
will be on the hook to buy 200,000 shares.
GT is up 0.94 percent to $22.55 and came into the session up 86
percent in the last six months. That makes it the second-best
performing member of the S&P 500 index during that time, as
shown on our
Traders may also think that there's little downside risk below $20
because GT peaked near that level in July and August before
breaking out. (See the discussion of
section for more.)
Total option volume is twice the daily average so far in the
session, according to the Depth Charge. Puts outnumber calls by
almost 9 to 1.