Large trade designed to exit Huntsman
David Russell | firstname.lastname@example.org
optionMONSTER's Depth Charge monitoring program detected the purchase of 23,262 November 11 puts for $0.35 and the sale of an equal number of November 13 calls for $2.12, resulting in a credit of $1.77. Volume was more than 30 times the open interest at each strike, clearly indicating new activity.
The options were probably traded against a long position in the stock. Selling the calls obligates the trader to unload shares for $13, while buying the puts ensures the right to sell the stock for $11. (See our Education section)
Including the credit earned, the net result is that the trader will enjoy a maximum exit price of $14.77 if HUN is above $13 at expiration. The lowest price will be $12.77, no matter how far the stock may fall.
The chemical maker rose 1.31 percent to $14.67 yesterday and is up 28 percent in the last month. Earnings beat expectations on Aug. 1, but revenue missed consensus estimates.
The heavy trading on the November options occurred at the same time that 23,262 August 13 calls were sold for $1.40 below previous open interest.
Overall, it appears that the investor was long both August calls and shares. Now the trader has dumped the August calls and is positioning to exit the stock as well.
Yesterday's bearish trade stands in contrast with highly bullish activity just one session earlier. It pushed total volume to more than 90,000 contracts--about 28 times HUN's daily average.