Bearish Traders Bet Against Logitech

OptionMonster co-founder Pete Najarian provides options picks Monday, Wednesday and Friday in TheStreet.com's Deep in the Money Calls newsletter.

David Russell, reporter for OptionMonster.

NEW YORK (TheStreet) -- Logitech International(LOGI Quote) has been running out of steam as it grapples with $19, and now traders are positioning for a drop.

OptionMonster's real-time tracking systems detected unusual buying of the December 20 puts, which traded 2,244 times against open interest of 261 contracts. Most of the large transactions priced for $3.

Logitech is down 5% to $16.87 in morning trading. The stock more than doubled between its March lows and early August but since then has been struggling to make new highs. It now appears to be rolling over as its 50-day moving average turns negative.

The company -- which makes keyboards, mice, Web cameras and other computer peripherals -- beat sales and earnings forecasts the last time it reported on Oct. 22. Yesterday Logitech said it would pay $405 million for video-conferencing company LifeSize.

By purchasing in-the-money downside puts, investors will profit almost immediately from declines in the share price from current levels. Compared with at-the-money options, the strategy reduces the amount of premium that will be lost if Logitech fails to move as expected. However, it costs more to implement and will produce smaller gains relative to moves in the stock.

The activity pushed overall options volume in the name to seven times greater than average. Puts outnumbered calls by 16 to 1.

-- Reported by David Russell of OptionMonster in New York.