Put activity surged in New Oriental Education & Technology
today, but the activity apparently isn't bearish.
Some 2,800 January 22.50 puts were bought in the Chinese company,
which runs English-language schools on the mainland. Most of the
contracts priced for $2.10 to $2.20, and volume was more than 20
times open interest in the strike.
A large number of shares were bought at the same time, so there are
two possible explanations for the trade. One is that the investor
likes EDU and is using the puts to hedge a
in the name. Alternatively, he or she may be implementing a
trade. (See our
That strategy is intended to profit from higher option premiums
because owning both shares and puts makes them directionally
neutral. Their hope is that implied volatility will rise, which
will increase the value of the puts on a relative basis.
EDU is down 1.09 percent to $26.22 in early afternoon trading. The
shares have been grinding in a range for the last 1-1/2 years.
Today's activity pushed total option volume in the name to more
than 30 times greater than average.
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