Protective trade on Mako Surgical

By David Russell,

Shutterstock photo

Mako Surgical has been rallying hard, and now one investor wants protection.

optionMONSTER's Depth Charge tracking system detected the purchase of 2,000 August 17.50 puts for $2.35 and the sale of 4,400 August 15 puts for $1.10. Volume was more than 5 times open interest in both strikes.

MAKO The trade was a variation of a ratio spread and is designed to leverage a small drop in the maker of orthopedic devices. It cost just $14,000 to implement and will earn a maximum profit of $500,000 if MAKO closes at $15 on expiration.

At lower prices, the investor will be forced to buy shares for $15 because of their larger short position in the puts. The transaction was probably the work of a long-term shareholder who wants to hedge against a pullback in the near term but is willing to own more stock at a lower price in the future.

MAKO is up 2.11 percent to $17.88 in afternoon trading after hitting a new all-time high of $18.12 early in the session. It's up 79 percent in the last six months, squeezed higher against heavy short interest and galloping revenue growth. On Jan. 10, for instance, management said the number of operations using its surgical devices doubled in the fourth quarter versus the same period in 2009.

Overall option volume in MAKO is 10 times greater than average today, with puts outnumbering calls by 48 to 1.

(Chart courtesy of tradeMONSTER)

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
Referenced Stocks: MAKO

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