A bearishly driven options trader is dismissing the fact that
Put volume was roughly triple what is typically expected in the AIG option pits yesterday, and this large bearish spread is responsible for about 40% of it. Two blocks of 13,550 contracts changed hands as the
Essentially, a bear put spread allows a trader to acquire a long put at a cheaper price, because the premium paid is offset by selling a lower-strike option. As a trade-off, the spread buyer caps profits at the short strike. In this trade, the maximum gain of
Puts have been the preferred flavor among options traders, even as AIG continues to muscle higher. The 50-day put/call volume ratio tracking buy-to-open activity at the
Similarly, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.98 suggests put open interest is near parity with call open interest for options expiring within three months. This reading, also, is near an annual high, ranking in the 85th annual percentile.
Analysts aren't all that optimistic toward AIG either, as evidenced by the average 12-month price target of
Given AIG's colorful background, it's understandable that there is some lingering skepticism toward the stock. But eventually, more and more investors may opt to view the uptrend as their friend and hop aboard the bullish bandwagon. If this happens sooner rather than later, traders speculating with bearish options may be out of luck.
|Copyright:||Copyright 2012 Schaeffer's Investment Research, Inc.|
|Source:||Schaeffer's Investment Research, Inc.|