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Bears look to bite Darden Restaurants
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 Education section for more on why it's often safer to trade options than common stock.)
Some 8,500 calls and puts traded in the session, almost 12 times their average amounts. DRI's brands include Red Lobster and Olive Garden.