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Cautious trade before TiVo earnings

TiVo reports after the bell, and one investor is protecting against a drop.

optionMONSTER's Depth Charge monitoring system detected the purchase of 7,000 September 8 puts for $0.60. Equal-sized blocks were sold in the September 7 outs and the September 10 calls at about the same time for $0.19 each. Volume was above open interest in all three strikes.

The trade resulted in a net cost of $0.22 and will earn a maximum profit of 355 percent if the digital-video stock closes at or below $7 on expiration. It will also force the trader to sell stock if it pops above $10, so it if wasn't the work of a shareholder, he or she would face losses above that level.

TIVO fell 2.30 percent to $8.06 in afternoon trading and has been trapped between $8 and $10 since May 2010. The company has been in an unusual position for more than a year, with weak operating results but a strong portfolio of intellectual property.

The stock saw bullish activity last week after an analyst report identified Google as a potential buyer, and identified a fair value roughly double its current price. Some traders doubled their value in those options before shares falling once again.

Overall options volume in TIVO is triple the average amount so far today.

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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