Coinstar has rallied hard, and one investor is betting that it has run out of steam.
optionMONSTER's Depth Charge tracking program detected the purchase of about 3,000 November 45 puts for $1.95 and the sale of an equal number of November 40 puts for $0.90. This bearish put spread resulted in a cost of $1.05.
The trader stands to earn a maximum profit of 376 percent if CSTR closes at or below $40 on expiration. That level is important because it's where the stock has bounced several times this year. (See our Education section)
CSTR rallied more than 30 percent in the first half of the month but fell 3.73 percent to $51.40 yesterday. The next big event that could move the shares is the release of third-quarter earnings after the bell on Oct. 27.
The company is attempting to transform from a slow-growth model based on coin-counting machines to a DVD-vending model. The problem is that it faces heavy competition from companies such as Blockbuster, which caused CSTR's revenue to miss the mark the last time results came out in July.
Short interest also ended September at 36 percent of the float, indicating that a large constituency of traders are bearish on the stock.
Overall option volume yesterday was more than twice Coinstar's daily average, with puts outnumbering calls by 5 to 1, according to the Depth Charge.
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