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.
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