Lorillard gapped lower on a downgrade last week, and the bears are looking for more downside.
optionMONSTER's Depth Charge tracking system detected the purchase of more than 7,800 March 70 puts on the cigarette maker, most of which priced for $2.10 to $2.20. Volume was more than 110 times open interest in the strike.
LO is down 0.38 percent to $80.88 in midday trading. Stifel Nicolaus cut its rating on the company--whose brands include Newport, Maverick, and Kent--to "hold" from "buy" on Thursday. The shares plunged below $82 on the news and have failed to regain that level since. Shortly before the downgrade, LO had traded above $83 for the first time since early 2008.
Today's option trades reflect a concern the shares will continue pushing lower. The position will turn a profit if LO drops at least 16 percent by expiration.
Overall option volume in LO is 8 times greater than average today, with puts outnumbering calls by an extremely bearish ratio of almost 1,000 to 1.
(Chart courtesy of tradeMONSTER)
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