Trader bets against Danaher rebound

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Danaher is trying to rally, but one investor is totally bearish.

optionMONSTER's Depth Charge tracking system detected the purchase of 1,500 July 52.50 puts for $2.72 and the sale of an equal number of July 45 calls for $0.47. Volume was more than 30 times open interest at both strikes.

Known as a put spread , the strategy is a common way to leverage downside in a stock's price. The unusual aspect of yesterday's trade is that the July 52.50 contracts were in the money, which increases cost but also makes it easier to profit.

He or she paid $2.25, and will make money if the diversified-manufacturing company closes anywhere below $50.25 on expiration. A maximum profit of 233 percent will occur at $45. (See our Education section)

DHR gained 2.01 percent to $51.32 yesterday. It hit an all-time high of $56.45 at the start of April but has been drifting lower since. The shares bounced at $50 earlier this week, but yesterday's trader apparently thinks that they will roll over soon and continue their downtrend.

Overall option volume was more than triple the daily average, with puts accounting for more than four-fifths of the total.



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: DHR

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