By Jud Pyle, CFA, chief investment strategist for the Options News Network
Without any news to drive their trading action, investors in
have scooped up thousands of puts today in the March series.
More than 15,000 out-of-the-money March 65 puts have hit the tape today, compared to open interest of just 2,154 heading into the session. This indicates that these puts were traded to open. Shortly after 2:00 PM EST, a block of 15,000 contracts hit the tape, trading for $2.65 per contract ($3.97 million for the entire block). This was the ask price at the time, suggesting that the puts were bought to open.
The put is currently up 5 cents on the day vs. a 58-cent drop in the stock. Implied volatility on the put currently stands at 49%, compared to a 63-day realized volatility of 39.
The investor who bought these puts would need WHR to take quite a plunge -- to $62.35 -- by March expiration in order to make money. But remember that investors could sell these puts (hopefully for a profit), if WHR moves significantly lower in the next couple of months, even if the shares do not fall below the $62.35 level.
While this notable put-buying activity should not be cause for concern for those investors long WHR shares, it is interesting that an investor bought WHR puts that are out-of-the-money by nearly 17%. This trader could be expressing bearishness in the stock or hedging a long stock position with these put options. WHR earnings are expected on or around Feb. 8, several weeks before these March options expire.
WHR shares have rallied more than 200% from their March lows, but have been shuffling sideways since mid-September. The stock is currently a chip-shot away from its 52-week high, reached on Oct. 26, and perhaps investors believe this rally could be petering out.
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."