Why Vera Bradley put action isn't bearish

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One investor is using puts to navigate a trade in Vera Bradley.

optionMONSTER's tracking systems detected the sale of more than 3,200 May 30 puts for $2.30 and $2.35. Volume was more than 20 times open interest in the strike.

VRA fell 1.28 percent to $29.42 yesterday. The maker of women's bags and accessories, known for its floral designs, is down more than 20 percent so far this month but is attempting to hold the same $28.50 level where it bounced in December.

The investor is now on the hook to buy shares for $30 if they close below that level on expiration. Including the credit earned, their entry price would be $27.65 to $27.70 -- a healthy margin below market value.

The strategy takes advantage of the time value in the puts, using it to cushion against fluctuations in the near term. That spares the investor the difficulty of picking a bottom in the stock. And, if it closes above $30 on expiration, they will keep the premium without buying shares. See our Education Section for more.

Overall options volume in VRA was 11 times greater than average in the session.



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: VRA

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