Caution reigns as Teck bleeds lower

optionMONSTER

Teck Resources has been bleeding lower, and the tone remains cautious.

optionMONSTER's Depth Charge monitoring program detected the purchase of 4,700 September 23 puts for $0.66 and the sale of 8,000 August 23 puts for $0.03. The shorter-term contracts expire today and had open interest of 8,365 contracts when the session began, so it's highly probable that an existing position was rolled forward in time.

Puts lock in the price where shares can be sold in the producer of coal, copper and zinc. They will inflate in value if the stock declines, letting traders hedge long position or speculate on a drop without the risk of short-selling. (See our Education section.)

Today's  transaction cost $286,000 and will provide an additional month of downside exposure. A drop to the mid-June low of $21.23 will at least triple their money. The March lows would yield a 350 percent profit. 

TCK fell 1.04 percent to $22.77 in early afternoon trading, and has lost 19 percent of its value in the last year. Shares are currently squeezing between their 100- and 200-day moving averages, which could make chart watchers expect a sharp move when the triangle is broken. 

Total option volume is 9 times greater than average in the session, with puts outnumbering calls by 18 to 1.

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