NetEase is breaking lower today, and the bears are in hot pursuit.
optionMONSTER's Depth Charge tracking system detected the purchase of about 3,700 May 33 puts against open interest of 1,299 contracts. A first group of trades priced for $1.10 to $1.40, followed by a second block for $1.90 after the shares had fallen.
NTES fell 3.1 percent to $32.22 in afternoon trading and is down 9 percent in the last month. The Chinese Internet company has been punished by weak sentiment in the emerging-market and technology sectors, despite reporting strong earnings on Feb. 25. Its next release is scheduled for May 19.
Today's trades are noteworthy because the investor used in-the-money contracts, which allowed them to profit more immediately from incremental declines in the share price. The strategy is similar to a transaction on Longtop Financial Technologies in March and reflects a belief that downside in the stock will be limited.
Some 2,000 May 32 puts were also bought on NTES, mostly for $1.05 and $1.35, according to the Depth Charge.
Overall options volume in the company is more than 4 times the daily average level. Puts account for 96 percent of the activity.
(Chart courtesy of tradeMONSTER)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.