Why put buyers are targeting St. Jude

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St. Jude is trying to bounce, but the bears are coming down on it like a ton of bricks.

optionMONSTER's Depth Charge tracking program detected the purchase of about 7,000 January 42.50 puts for $7 against open interest of about 5,686 contracts. The trade accounted for most of the trading in STJ so far today.

Shares are down 1.21 percent to $36.69, having surrendered an earlier push toward $38. They've lost 16 percent of their value in the last month alone and have been dropping violently since early May.

The maker of heart devices has struggled as investors worry about the future of its Quadrapole product. Management also cut guidance the last time earnings came out on July 20. The next release is scheduled for the morning of Oct. 19.

Today's options activity is unusual because it entails in-the-money contracts. This suggests that the investor is placing a speculative bearish wager rather than hedging a long position in the name. (See our Education section)

Given how steadily STJ has been falling, it appears to be a momentum trade looking for the downtrend to continue after a brief rebound this week.

Overall option volume in the name is 12 times greater than average, with puts outnumbering calls by 47 to 1.



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: STJ

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