By David Russell of OptionMonster
NEW YORK -- Option traders took bearish positions in chipmaker Freescale (FSL) on Monday morning, and by midday they were already collecting profits.
OptionMonster's tracking systems detected the purchase of 9,300 May 22 puts early in the session for 65 cents to 70 cents in volume far above previous open interest of just 884 contracts, clearly showing that new positions were initiated. There was also heavy selling in the May 24 puts for $1.68 below open interest in that strike, so it appears that an existing downside position was rolled to a lower strike and increased in size.
Puts lock in the price where shares can be sold, letting investors hedge long positions or speculate on a decline. Either way, those May 22 contracts were trading at $1.25 to $1.45 as Freescale's stock fell near its session low of $21.11, doubling their value in just few hours.
Freescale declined 3.36% Monday to close at $21.55. The semiconductor company fell below its 50-day moving average on Friday after reporting first-quarter results the night before.
Overall option volume in the name topped 20,900 contracts Monday, with puts making up more than 97% of the total.
Russell has no positions in FSL.