Markets

Limited downside seen for Cognizant

Cognizant Technology is getting hit today, but traders apparently think that the downside is limited.

optionMONSTER's tracking programs detected the sale of about 4,700 January 60 puts for $1.50 to $1.60 against open interest of just 1,448 contracts. About 2,000 January 55s were also sold for $0.50.

The transactions obligate investors to buy CTSH at the strike prices if they fall to those levels. They probably expect the Indian outsourcing stock to hold its ground around current levels, in which case the puts will expire worthless and they'll keep the premiums.

But even if they do decline, the income earned will provide some cushion. (See recent column by Chris McKhann for more on why traders often sell puts as a way to manage getting exposure to stocks they may like.)

CTSH fell 6.88 percent to $62.98 in afternoon trading has been trending lower since the spring. Shares are down today amid negativity in the broader technology sector following Oracle's big revenue miss last night.

Overall option volume in CTSH is 9 times greater than average 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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