Temple-Inland ripped on a takeover offer last week, and now one bear thinks that what goes up must come down.
optionMONSTER's Depth Charge tracking system detected the purchase of 5,300 July 26 puts for $0.15 and the sale of an equal number of July 29 calls for $1.05. The trade generated a credit of $0.90, which the investor will get to keep if the packaging stock closes at or below $29 on expiration.
He or she will also profit from a steeper correction and earn unlimited profits below $26. The transaction, which will lose money to the upside, may have been the work of a shareholder looking to hedge a long position in the shares, or could be an outright bearish play.
TIN fell 0.57 percent to $29.48 in morning trading. It had mostly traded in the $20-24 range since late 2010 but exploded higher on June 7 after the company rejected an unsolicited takeover proposal from International Paper for $30.60 a share.
The company's last earnings report on April 20 beat expectations on the top and bottom lines amid strong demand for corrugated packaging. However, given its high price and weakness in the broader market, some traders may think it's due for a pullback from the current level, its highest since early 2007.
Overall option volume in TIN is almost twice the average amount so far today, according to Depth Charge.
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