H&R Block attracts big bearish spread


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H&R Block has rallied more than 70 percent from a long-term low in October, and one big investor apparently thinks that it might surrender some of those gains.

optionMONSTER's Depth Charge tracking system detected the purchase of 10,100 January 15 puts for $1.49 and the sale of an equal number of January 10 puts for $0.35, resulting in a net cost of $1.14. This bearish put spread will earn a maximum profit of 338 percent if the tax-preparation stock closes at or below $10 on expiration. (See our Education section)

HRB rose 4 percent to $17.41 on Friday and has been moving straight up all year. It had trended lower since 2005 as customers shifted to software such as Intuit's TurboTax. The losses accelerated throughout most of last year, when it hit a decade low of $10.13.

Since then it's been rallying higher amid bullish call buying, fueled first by short covering and then as the business environment improved. HRB's last earnings report on March 9 beat expectations as customer traffic increased for the first time in years.

Friday's bearish trade could be the work of an investor who owns the stock and wants to hedge against a drop or of a speculative bear looking for a reversal lower.

The transaction pushed total options volume in the name to more than seven times the daily average, with puts accounting for almost four-fifths of the activity.

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

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This article appears in: Investing , Options

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