Put buyer sets sights on Jefferies

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Jefferies Group reports earnings tomorrow morning, and at least one trader is positioning for a potential decline.

optionMONSTER's Depth Charge tracking system detected the purchase of 1,500 May 25 puts for $0.40 and the sale of a matching number of May 22.50 puts for $0.05. The transaction cost a net debit of $0.35.

JEF Chart JEF is up 0.55 percent to $27.55 this morning and has risen 16 percent so far this year. That outpaces the performance of competitors such as Morgan Stanley and Goldman Sachs, plus the Financial Select Sector SPDR exchange-traded fund ( XLF ).

Today's options strategy, a bearish put spread, is designed to leverage a decline in JEF and will earn a 614 percent profit if the stock closes at or below $22.50 on expiration.

The trade comes one session after GS plunged on a fraud lawsuit by the Securities and Exchange Commission, which may cause some investors to worry about downside in other investment banks. JEF has emerged from the financial panic as a new major player, allowing it to record huge revenue gains in recent quarters.

The options trade pushed overall options volume in the stock to four times greater than average so far today. Puts account for 97 percent of the activity.

(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 The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: GS , JEF , MS , XLF

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