Traders have been flocking to Chinese Internet stocks almost
every day, and now Renren is grabbing the attention.
optionMONSTER's trade scanners detected the sale of more 5,000
January 3.50 puts for $0.30 and $0.35. Volume surpassed previous
open interest of 4,461 contracts, indicating that new positions
The investor is now on the hook to buy shares in the social-media
stock for $3.50 if they close below that level on expiration. Above
it, he or she keeps the premium as profit and the options expire
is commonly used when traders like a stock but don't want to expend
capital getting long. It lets them collect income now while
programming an entry at lower prices. The strategy also reflects a
belief that downside is limited. (See our
RENN surged 7.69 percent to $3.92 yesterday, following an 8 percent
gain in the previous session. The Beijing-based company has
Chinese Internet stocks
in recent months but has been holding support above its 200-day
moving average since late July, which could make some chart
watchers think that it's ready to turn around.
Chinese Internet names have been the strongest group in the stock
market for the last three months on our
market scanner, as shown on the screen shot below, but RENN has
been the weakest member during that time.
Traders may also expect the $3.50 level to offer support because
it's where the shares peaked in September. That could also help
explain yesterday's put selling at that level.
Total option volume was 12 times greater than average in the
(Graphic courtesy of
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