Puts surge in Dominion following quake

By David Russell,

Shutterstock photo

Yesterday's earthquake shook confidence in Dominion Resources, which is based less than 50 miles from the epicenter.

optionMONSTER's Depth Charge monitoring program detected a surge of put buying in the Virginia-based electricity company. Most of the activity occurred in the September 45 contracts, which traded more than 14,000 times -- mostly for $0.55 to $0.90. Volume was 11 times greater than open interest in the strike.

D is pushing against all-time highs, and has benefited as investors take refuge in the safety of utility stocks. It fell precipitously after the tremors occurred in the hamlet of Mineral, about 45 miles northwest of its corporate headquarters in Richmond.

The shares then fought their way back, and ended the session up 1.76 percent to $49.10. The company issued statements confirming there were no breaches at its nuclear plants in the state.

The put buying occurred at the same time that D fell. By using options, investors were able to hedge against a potential collapse without being forced to liquidate large amounts of stock. See our Education Section for more on how options can be used to manage risk.

More than 24,000 contracts changed hands in the session, which is 29 times greater than average, with puts outnumbering calls by 6 to 1, according to Depth Charge.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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

This article appears in: Investing Options
Referenced Stocks: D

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