The bears hope bad news is on the menu when Darden Restaurants
reports earnings later this morning.
optionMONSTER's Depth Charge monitoring program detected unusual
activity in the September 55 puts throughout yesterday's session.
There was steady buying in the contracts, initially for $1.15 and
$1.20, followed by prices as high as $1.44. Almost 3,000 traded
against previous open interest of 1,664 contracts.
DRI closed the day down 1.05 percent at $54.72. All of the options
changed hands when shares were below $55, making the puts
in the money
. Such puts are too expensive to be used for protection, so the
buyer was likely placing a short bet rather than
hedging a long position
Darden is barely $1 below its all-time high of $55.84 reached in
May and has beaten expectations the last two quarters. The stock
could gap to new highs if today's results are strong, so the
traders are using puts instead of risking potentially huge losses
by shorting the stock.
Now, if DRI does explode higher, they will lose only the premium
paid to buy the puts. (See our
section for more on why it's often safer to trade options than
Some 8,500 calls and puts traded in the session, almost 12 times
their average amounts. DRI's brands include Red Lobster and Olive