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Limited downside in Juniper Networks (NYSE: JNPR)?

By Karla Yeh,  February 04, 2010, 06:29:54 PM EDT

Despite strong earnings results from Cisco Systems (NASDAQ: CSCO ), shares of competitor Juniper Networks Inc. (NYSE: JNPR ) are currently down 1.5% on the day. At least one investor is calling for a floor in the stock in the near-term and expressing that bet by selling puts.

The near-the-money March 24 puts have crossed the tape more than 10,200 times versus current open interest of 670 contracts, suggesting investors traded these options to open. We saw several blocks go off close to the bid price of 83 cents per contract around 11:20 a.m. EST today, indicating investors sold these options betting on limited downside in the stock.

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize this trade.

The March 24 puts are currently trading up 11 cents on the day, which is lower than a delta of 35 would suggest.

Investors who sold these puts are capping their gain on this trade at 83 cents per contract, and will make money if JNPR shares close higher than $23.17 at March options expiration in 43 days. Additionally, the investor is factoring in a potential 7% drop in the stock. For this reason, this trade is more neutral than absolutely bullish.




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


This article appears in: Investing, Options

Referenced Stocks: CSCO, JNPR



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