Put sellers are losing hope in Cemex.
Last week, optionMONSTER's tracking programs detected heavy activity in the September 7 puts as investors wrote protection to earn premium. They bought them back the very next session as CX bounced, and we saw more of the same yesterday as similar positions were closed.
This time, the October 5 puts, the January 2013 5 puts, the January 5 puts, the January 4 puts and the October 7 puts were purchased. Volume was below open interest in all the strikes, suggesting that existing short positions were unwound.
Investors sell puts when they think a stock has limited downside and wish to earn income from the passage of time. The fact they were bought back means that they no longer wish to have that risk, and fear that the Mexican cement company--already down 40 percent so far this year--could continue to fall.
CX declined 2.05 percent to $6.20 yesterday and at one point touched its lowest price in more than two years. While the company has enjoyed some growth in Europe, it faces slow demand in North America and is weighed by a heavy debt load.
Overall option volume in the stock was 6 times greater than average yesterday, with puts outnumbering calls by more than 8 to 1.
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