Trader writes insurance on Bebe-11/19/2009

Bebe has been grinding lower in recent months, but one investor expects the cash-rich retail stock to avoid a total collapse.

optionMONSTER's tracking systems detected the sale of about 8,000 March 5 puts for $0.45 against open interest of 598 contracts. The stock rose as the puts were written, which probably reflects hedging by a dealer who took the other side of the trade.

BEBE fell 2.09 percent to $5.61 in afternoon trading and is down 17 percent in the last three months. The women's apparel company has consistently missed its numbers as the recession erased about a quarter of its same-store sales. However, it has been accumulating cash, which now represents almost half its market capitalization.

The put seller probably expects the shares to hold their ground and hopes to walk away able to keep the $0.45 credit. The trader won't lose money unless BEBE falls to $4.55, just below its March low of $4.57.

This investor will also benefit from lower implied volatility, which is now at 60 percent for BEBE. That's up from 50 percent two months ago.

Overall options volume in BEBE is more than three times average today, with put sales accounting for about 95 percent of the activity.

(Chart courtesy of tradeMONSTER)

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