Markets

Protective strategy at work in St. Joe

St. Joe has pulled back following a big move, and one investor has protection on the name.

optionMONSTER's Depth Charge monitoring program detected the purchase of 1,300 October 22 puts for $0.94. An equal number of September 22 puts was sold at the same time for $0.60, but volume was below open interest in that strike. This suggests that an existing position was rolled from one strike to the other.

Puts lock in the price where a stock can be sold, letting investors hedge long bets or wager on a drop. Today's trader probably already owns the Florida land company and is using the options as a hedge. (See our Education section)

JOE is up 2.07 percent to $22.64 in midday trading. Cited on our Market Action webinar in March because of its cheap valuation, the stock rallied sharply in May and June before pulling back. It's now trying to bounce at its 100-day moving average, which could make chart watchers expect it will continue higher.

Nonetheless, the trader wants protection. By rolling their position, he or she avoided the quicker pace of time decay in the shorter-term contracts. They now have one more month of insurance for an incremental cost of $0.34.

Total option volume is more than twice the daily average so far, with puts outnumbering calls by 7 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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


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

In This Story

JOE

Other Topics

Options

Latest Markets Videos