Polypore has been struggling, and one investor is hedging
against a nightmare scenario.
optionMONSTER's Depth Charge tracking system detected the purchase
of 5,000 September 22.50 puts for $1 and the sale of 2,500 June 35
puts for $3.20, resulting in a credit of $1.20. Volume was above
open interest in both strikes.
The trader is positioning for a major collapse in the company,
which has been trending lower since July. The trade's ideal
situation is that PPO holds its ground for the next three months
and then plummets toward $22.50 over the summer. The only way the
position can lose money is if the stock falls below $33.50 before
June expiration without proceeding all the way to $10.
The strategy is quite unusual, and combines elements of a
with a diagonal spread. (See our
PPO is up 2.92 percent to $36.69 today but is down 37 percent in
the last six months. The stock peaked above $70 last summer but has
been losing its ground amid weak demand for hybrid cars. PPO is a
major supplier of membranes used in batteries and had previously
touted hybrid vehicles as a growth opportunity.
Overall option volume in the name is more than 5 times greater than
average so far today, with puts outnumbering calls by 8 to 1.
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