Option traders are reversing direction on MetroPCS
Communications, from bullish to bearish.
Last week, optionMONSTER's tracking systems detected
bullish call buying
in the pre-paid wireless company. It ripped higher in subsequent
sessions and those contracts, the January 7.50 calls, more than
Yesterday the opposite occurred as traders purchased almost 8,000
January 10 puts, looking for downside. They initially paid $1.15
and $1.20 but later as much as $1.35 after the shares edged lower.
PCS ended the session down 6.39 percent at $8.79 after slamming
into resistance at its 100-day moving average. The company is still
licking its wounds after customer defections caused earnings to
miss estimates in August and November.
Calls fix the price an investor must pay to buy a stock, but they
are much cheaper than the shares because they represent only the
right to buy them. Puts are just the opposite, locking in a minimum
exit price and representing the right to sell the shares for a
given amount, no matter how low they go.
Investors use these instruments to manage risk and to speculate on
price changes. They can provide significant leverage if a stock
moves in the right direction but also end up worthless if it
doesn't. (See our
Overall option volume in the name was 6 times greater than average
yesterday, with puts accounting for 88 percent of the volume.
(A version of this post appeared on
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