Put Buyers in Genworth Financial

By Jud Pyle, CFA, chief investment strategist for the Options News Network

Genworth Financial (GNW Quote) did not announce significant news today, but at least one investor is taking the opportunity to bet on a potential slide in the life insurance company's shares by buying puts.

Out of the gate today, more than 7,000 Nov. 10 puts hit the tape vs. open interest of 2,831 contracts. By afternoon trading, more than 9,200 of these out-of-the-money puts traded, with the stock at $12. The implied volatility of these puts is currently 82.5, compared to a 63-day realized volatility of 70.85. These options have a volume-weighted average price of 45 cents today.

Assuming these investors hold these contracts until November expiration, this put purchase will make money if GNW shares expire lower than $9.55. But keep in mind that if the stock drops significantly throughout the next month, investors could take early profits on these long puts by selling them, rather than choosing to hold them through expiration on Nov. 20.

GNW saw its 52-week high just three weeks ago, and these shares are trading approximately 13 times higher than their March low of less than $1. This rally could be the reason we are seeing heavy put-buying in the name. Put-buying such as this does not mean investors should clean out their supply of GNW shares. But it is noteworthy that at least one investor expressed bearishness or bought puts to hedge a long position in the stock, most likely looking for further downside.

GNW has not confirmed the date of its earnings announcement this season, but based on past trends, it's likely that the company will release its quarterly report around Nov. 5. Meanwhile, GNW shares are down 8 cents to $11.78 so far on the day.

Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.