Markets

Long-term protection play in Salesforce

Salesforce.com is trying to lift itself, but one investor remains nervous.

optionMONSTER's Depth Charge monitoring program detected a surge of activity in the long-term January 2014 puts. Some 2,100 contracts were purchased at the 120 strike for $21.45, and an equal number were sold at the 85 strike for about $8.75. Volume was more than triple open interest in both.

The trade cost $12.70 and will earn a maximum profit of 176 percent if the software stock closes at or below $85 on expiration. Yesterday's trade is known as a bearish put spread because it leverages a move between two prices. Given the long time horizon, it's probably the work of a long-term investor who wants to protect a position in the shares. (See our Education section)

CRM rose 0.59 percent to $139.07 yesterday and has lost more than 11 percent of its value in the last three months. The company's earnings have beaten estimates for the last two quarters, and its stock appears to be bouncing at its 200-day moving average, which some chart watchers may consider bullish.

Overall option volume was twice the average amount yesterday, with puts outnumbering calls by almost 3 to 1.

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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