Huntsman draws bearish 3-way trade


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Huntsman has been weakening along with most other chemical companies, and one investor is hitting the sell button.

optionMONSTER's Depth Charge tracking system detected a large three-way trade yesterday, with each part consisting of 15,168 contracts. The May 17 calls were sold for $1.53, the June 18 calls were sold for $1.10, and the June 15 puts were bought for $0.11. Volume was below open interest in the May contracts.

The transaction is noteworthy because it appears that an investor closed a bullish long position in the front-month calls contracts and changed it to a bearish strategy in the June expiration. The trader then collected $2.52 of premium and now stands to profit from the shares heading lower rather than rallying.

HUN fell 0.95 percent to $18.72 in afternoon trading. The shares had more than doubled between September and early this month, when they topped out around the same level where they had traded immediately before a large bearish gap in June 2008. They formed a so-called shooting-star candlestick pattern near that level, which some chart watchers may consider evidence of a top.

The chemical sector has been one of the strongest in the market this year, with almost every company crushing forecasts. HUN's reported profit of $0.47 a share on May 5--almost twice the $0.24 consensus estimate. Share prices have been struggling since early May, however. (Cellulose company Buckeye Technologies also saw noteworthy put action yesterday.)

The bearish trade on HUN pushed overall options volume in the name to 11 times greater than average, according to the Depth Charge.

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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