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Bears sticking with BHP Billiton

BHP Billiton has been under pressure along with other metals stocks, and traders are bracing for further downside.

optionMONSTER's Depth Charge monitoring program detected the purchase of 27,500 January 25 puts for $0.71 today. Volume dwarfed previous open interest of 76 contracts, which means that new money was put to work.

Puts gain in value to the downside because they lock in the price where a stock can be sold. Investors use them to hedge long positions or to speculate on a drop. They can also generate significant leverage and eliminate the risk of traditional short selling. (See our Education section)

BHP is down 0.78 percent to $31.90 in afternoon trading, and has lost one-third of its value this year. The producer of products such as copper, coal, and iron ore has taken a beating from China's slowing growth, and shares are now back to levels last seen near the bottom of the financial crisis in 2008.

Total option volume is 27 times greater than average so far in the session, with puts outnumbering calls by a bearish 40-to-1 ratio.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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