U.S. Airways jolted higher yesterday, but one investor remains
optionMONSTER's Depth Charge monitoring system detected the
purchase of 10,000 October 11 puts for $0.29 and the sale of an
equal number of October 10 puts for $0.10. Volume was below open
interest at the 10s, so there are two possible explanations for the
One is that both sides of the trade were opened, in which case it
bearish put spread
. That would have cost $0.19 and have a maximum profit of 426
percent if the airline stock closes at or below $10 on expiration.
The more likely possibility is that the trader owns LCC shares and
previously held the 10 puts
as a hedge
. Now that the stock has risen, he or she closed that position and
rolled it to the higher strike to protect some gains. (See our
LCC gained 8.27 percent to $11.78 yesterday and has been rising
after a pullback over the summer. Airline operators have continued
to surprise to the upside and now stand to benefit from lower fuel
prices as oil slumps. Earlier this week, the industry's trade group
raised its profit forecast as tight capacity keeps fares high.
Overall option volume in the name was 8 times greater than average
in the session, according to the Depth Charge. Puts accounted for
more than two-thirds 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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