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Bears make quick work of Freescale

By: optionMONSTER
Posted: 4/29/2014 5:49:00 AM
Referenced Stocks: FSL

Option traders took bearish positions in chip maker Freescale yesterday morning, and by midday they were already collecting profits.

optionMONSTER's Depth Charge system detected the purchase of 9,300 May 22 puts early in the session for $0.65 to $0.70 in volume far above previous open interest of just 884 contracts, clearly showing that new positions were initiated. There was also heavy selling in the May 24 puts for $1.68 below open interest in that strike, so it appears that an existing downside position was rolled to a lower strike and increased in size.

Put lock in the price where a stock can be sold, letting investors hedge long positions or speculate on a decline. Either way, those May 22 contracts were trading at $1.25 to $1.45 as FSL shares fell near their session low of $21.11, doubling their value in just few hours. (See our Education section)

FSL declined 3.36 percent yesterday to $21.55. The semiconductor company fell below its 50-day moving average on Friday after reporting first-quarter results the night before.

Overall option volume in the name topped 20,900 contracts yesterday, with puts making up more than 97 percent of the total.

(A version of this post appeared on InsideOptions Pro yesterday.)