SunEdison trade braces for fall

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SunEdison has pulled back, and someone is apparently afraid that it will keep falling.

optionMONSTER's Depth Charge tracking system detected the purchase of 3,000 April 17.50 puts for $1.18 yesterday. Equal-sized blocks were sold at the same time in the April 16 puts and the April 20 calls for $0.46 and $0.40 respectively. Volume was more than 6 times the previous open interest in each of the three strikes, indicating that new positions were initiated.

The overall trade cost $0.32 and will protect against short-term losses in the solar-energy stock, earning a profit of 369 percent on a drop to $15 or lower. The strategy also obligates the investor to sell shares above $20, so it's likely that he or she is using the trade to protect a long position in the stock. (See our Education section for more on the strategy, which combines a put spread with a covered call .)

SUNE fell 0.86 percent to $17.26 yesterday. The stock more than doubled between early November and the start of last month, stalled at its old peak from 2009, and has been skidding lower since. The name also drew bullish call buying several times this year, with investors doubling and tripling their money on more than one occasion.



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.

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


This article appears in: Investing , Options

Referenced Stocks: SUNE

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