Credit: Shutterstock photoTraders are apparently looking for further losses in Brocade Communications, which may be developing a bearish pattern on its chart.
optionMONSTER's Depth Charge system detected the purchase of almost 3,400 October 11 puts $0.85 to $0.88 yesterday. The volume dwarfed the strike's previous open interest of just 196 contracts, which indicates that new positions were initiated.
Puts lock in the price where the semiconductor stock can be sold, so they increase in value when shares slide. That way, investors can hedge bullish positions or speculate on a drop. Yesterday's trade is probably an outright bearish play because it is using an in-the-money strike. (See related column in our Advantage Point newsletter.)
BRCD fell 1.54 percent to $10.23 yesterday. Shares peaked around $11 in April and again last month in a potential double top , so some chart watchers may view that level as resistance and expect further declines.
Total option volume in Brocade was 6 times greater than average in the session, with overall puts outnumbering calls by 16 to 1.
(A version of this post appeared on InsideOptions Pro yesterday.)
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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.
