Bearish trade targets McDermott

optionMONSTER

A bearish position dominates the early option activity in engineering and construction company McDermott.

Virtually all of the action is in the January 7 puts, where a block of 4,420 was bought for $0.84 in volume that is already 4 times the full-session average at that strike, according to optionMONSTER's Depth Charge tracking system. This is clearly a new position, as previous open interest was just 106 contracts.

The put buying, which wasn't tied to any trading in the underlying shares identified by our systems, appears to be an outright bearish play in the name. It is possible that this is protection on an existing long position in the stock, but most traders don't hedge with a strike that is right at the money . (See our Education section)

MDR is down a penny at $7.05 this morning, in the middle of its recent range. The stock hit a 52-week low of $6.58 two weeks ago, right after the company's last earnings report.

Total option volume in the name is just shy of 5,000 so far today, already more than triple its daily average for the last month. Only 52 of those contracts are calls, a reflection of the session's bearish sentiment.


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