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

The net bet of one customer's one-by-two put spread on


(VRSN) - Get VeriSign, Inc. Report

suggests some speculators are expecting the stock price to head lower even after the company reported positive earnings last Thursday.

In afternoon trading, a customer bought 25,000 Sept. 25 puts for around $2.85 per contract and sold twice as many Sept. 20 puts for 93 cents each with VRSN stock trading near $24.66.

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Interestingly, this transaction suggests that the customer is slightly bearish and wants the stock to be between $20 and $25 at September expiration, representing a drop of up to 19%. Current open interest for the Sept. 20 put options is 407, while current open interest for the Sept. 25 puts is just 308. This one-by-two put spread trading today effectively pushed implied volatility down to 50.5 for Sept. 20 puts and 44.4 for Sept. 25 puts today.

While this trade looks like a lot of put-options volume, some puts are being bought as others are being sold, which effectively cancels out some of the VRSN trade volume.

Last week, VRSN reported an 8% increase in earnings, which beat analysts' estimates. The Internet security provider made $65 million, or 34 cents a share, in the first quarter, compared with an $8 million loss in the same period last year. Analysts expected the company to report earnings of 28 cents per share in the first quarter. Next quarter, analysts expect earnings per share to drop to 26 cents, but rebound to 28 cents for the third quarter.

VRSN stock declined 0.3% on the day to close at $24.19. The company has not hit a 52-week low of $16.23 since Nov. 21 last year, but there is plenty of room for VRSN to run higher before it hit a 52-week high of $42.50.

Investors should not interpret high put-options activity as a reason to turn bearish or sell their VRSN shares. But at least one customer may be betting that VRSN won't be above the $25 strike come September options expiration.

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

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."