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Put seller takes another shot at Popular

By: optionMONSTER
Posted: 6/29/2011 1:35:00 AM
Referenced Stocks: BPOP

If at first you don't succeed, sell more puts.

That seems to be the strategy of one investor who thought Puerto Rican bank Popular would stay above $3. He or she had previously sold July puts at that strike but yesterday bought back 20,500 of them for $0.44 and sold 30,000 October 2.50 contracts for $0.20.

BPOP finished unchanged at $2.63 yesterday. The last earnings release on April 25 showed a big drop in bad-loan provisions, which pushed earnings above forecasts.

That might have led the put seller to believe that downside was limited and induced them to write protection. But the shares nonetheless proceeded to lose 17 percent of their value since the report, following most other banks downward.

Rolling the position to October saves the trader from being forced to buy shares at $3 and provides an additional three months for BPOP to rebound. The trade pushed total option volume in the name to 15 times greater than average.