By Jud Pyle, CFA, chief investment strategist for the Options News Network
, we see that 10,000 of the Jan 2010 15 puts have traded today. Current open interest in these put contracts was previously just 20 contracts, according to the Sidewinder report at www.onn.tv. So it is easy to determine that today's activity will likely translate as new open interest.
What is interesting about this activity is that this volume was initiated by one buyer. The puts traded for around $4, making the trade worth $4 million and meaning the investor needs the stock to close below $11 at January expiration for the puts to make money. That is a drop of almost 35% from current levels (but the stock has about nine months to make the move).
Shares of LBTYA are up over 6% today to $16.90. There is no particular news in the name, and that might be newsworthy in and of itself. In fact, LBTYA is up over 70% from its 52-week closing low of $9.37 on March 9.
Put-buying such as what crossed the tape earlier today does not mean investors should run right out and sell all of their shares in LBTYA. After all, the put buyer could be buying shares of stock one for one with the puts, expecting a gap to the upside.
Or, the investor might be purchasing debt instruments and buying the puts as a hedge there. In the past month, we have seen the farther out-of-the-money Jan 10 and Oct 10 puts also purchased 10,000 times each. So someone is keeping a definite eye on LBTYA, and trading in hefty quantities.
Jud Pyle is the chief investment strategist for Options News Network 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.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."