SolarWinds has been range-bound after a big rally, and one
trader is playing it safe.
optionMONSTER's Depth Charge monitoring program detected the
purchase of 1,500 June 45 puts for $1.90 and the sale of an equal
number of March 45 puts for $0.25. Volume was below open interest
in the March contracts, indicating that a position was rolled
forward in time.
The investor probably owns shares in the company and is using the
as a hedge
. Adjusting the trade provides an additional three months of
downside protection at an incremental cost of $1.65. (See our
SWI tripled in value between September 2011 and September 2012 but
has been hovering in a range since. The enterprise-software maker
fell 5.19 percent to $53.01 yesterday despite beating expectations
in fourth-quarter results.
Earnings have been consistently strong, but they've been exceeding
consensus by narrowing margins. That could make be leading some
traders to think that all the good news is already priced into the
Overall option volume was 16 times greater than average, according
to the Depth Charge. Puts accounted for a bearish 80 percent of the