Check Point faces downside position

optionMONSTER

Traders are positioning for a potential drop in Check Point Software, which reports earnings in two weeks.

More than 5,400 July 49 puts traded in a strong buying pattern on Wednesday for prices from $1.20 to $1.35, according to optionMONSTER's Depth Charge tracking system. The volume was more than 10 times the strike's open interest of just 522 contracts before the session began, clearly showing that these are new positions.

The puts were not tied to any stock trading identified by our systems on Wednesday, but they could have been purchased to protect a long position established earlier. These options could alternatively be making an outright bet that CHKP will fall below $49 in coming weeks, but the contracts will expire worthless if the stock remains above that strike price. (See our Education section)

CHKP rose 0.46 percent to $50.01 on Wednesday. The stock hit support around $45 after its last earnings report in late April and then ran sharply above $51, but it has been trading sideways since then. The security-software company is scheduled to report second-quarter results on July 18, a day before the July options expire.

Total option volume in the name was more than 11 times its full-day average despite Wednesday's truncated trading session. Puts outnumbered calls by more than 7 to 1.


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