Why bear is targeting Lender Processing

By David Russell,

Shutterstock photo

Lender Processing Services has been a weak name in a bad sector, and one trader apparently thinks that the bottom might fall out.

optionMONSTER's Depth Charge tracking system detected the purchase of about 5,000 September 25 puts for $1.80 against open interest of just 131 contracts. The activity occurred two sessions before the company's first-quarter earnings report, scheduled for Thursday afternoon.

LPS rose 0.5 percent to $28.28 yesterday but has been steadily trending lower since late 2009. The company, which processes mortgages and provides services to banks, has issued weak guidance at least twice since October and management has been targeted in several shareholder lawsuits.

The stock is now sitting at its lowest level since November. Judging by yesterday's option action, investors may fear that a bad earnings report will send it through that support level to prices last seen at the nadir of the 2008 financial crisis.

Overall option volume in LPS was 25 times greater than average in the session, with puts outnumbering calls by the same amount.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: LPS

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