Bears look for more downside in Qihoo


Chinese Internet company Qihoo has been falling since it reported earnings last week, and traders are positioning for further declines in the next six months.

optionMONSTER's Depth Charge system detected heavy buying in the September 25 puts yesterday, led by two prints of 6,575 and 4,309 that went for $2.20 and $2.45 respectively. These are clearly new positions, as open interest in the strike was a mere 97 contracts before the session began.

QIHU fell 2.88 percent to $28.71 yesterday as shares continue to decline since fourth-quarter results were released on March 5. The stock is now just below its 100-day average after dropped below its 50-day average on Wednesday.

The puts bought yesterday, which lock in the price where traders can shares no matter how far they might fall, were not tied to any stock activity identified by our systems in the session. These options have been purchased as a hedge on a long position established earlier or as an outright bearish bet that QIHU will drop roughly 21 percent or more by expiration in mid-September. (See our Education section)

The put buying pushed total option volume in QIHU to 27,172 contracts yesterday, more than 3.5 times its daily average for the last month. Overall puts outnumbered calls by more than 5 to 1, a reflection of the session's bearish sentiment.

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