Archer Daniels Midland has been limping for months, and one
long-term trade wants to put the stock out of its misery.
optionMONSTER's Depth Charge monitoring system detected the
purchase of 2,600 January 2014 25 puts for $2.69 and the sale of an
equal number of January 2014 30 calls for $1.81. Volume was below
open interest at both strikes, indicating that a new position was
Known as a
, the trade cost $0.88 and is similar to shorting the
grain-processing stock. The trader will make money if ADM drops
toward $25 but will be forced to sell shares for $30 if it climbs
above that level.
He or she is probably using the strategy to protect a long position
in the name. (See our
section for more on how calls and puts can be used for hedging.)
ADM is up 0.07 percent to $27.18 in early afternoon trading but has
fallen about 15 percent since the spring. It declined throughout
June and July, capped by a weak quarterly report resulting from
poor margins and volumes. The stock has been making a feeble
attempt to rebound since then.
Today's bearish trade pushed total option volume in the name to
twice the daily average, according to the Depth Charge.
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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