PetSmart draws downside position

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PetSmart has been trying to rebound from a drop in March, but the bears are looking for a drop.

optionMONSTER's Depth Charge tracking program detected the purchase of some 2,000 June 67.50 puts, most of which priced for $2.05. Volume was more than 8 times previous open interest at the strike.

The investor has locked in the right to sell shares for $67.50 in the next 2-1/2 months no matter how far they might fall during that period. He or she may be looking to protect a long position against a drop or simply speculating on a decline in the share price. (See our Education section)

PETM rose 0.46 percent to $68.26 near midday trading. Shares appreciated more than 400 percent between late 2008 and August 2012 and have been drifting in a range since.

The pet-products retailer gapped lower on March 7 after issuing weak guidance and now appears to be making a lower high. That could be leading some chart watchers to believe that it's rolling over after that multi-year run.

Total option volume is almost quadruple the daily average, with puts outnumbering calls by a bearish 16 to 1.



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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: PETM

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