Huge downside play in BHP Billiton


A huge bearish trade topped the option action in BHP Billiton as shares bounced on Friday.

A trader bought 14,600 August 60 puts for $1.38 and sold the same number of August 50 puts for the bid price of $0.33. The volume was multiples of the previous open interest at each strike, clearly indicating new activity.

The resulting vertical spread cost the trader $1.05, which would be the maximum loss if shares are above $60 at expiration. The maximum gain would be $8.95 if the stock is below $50. Shares were last below that price in the middle of 2009. (See our Education section)

BHP was up 0.33 percent to finish the day at $67.26. The Australia-based energy and mining company had fallen in the morning to its lowest levels since early September. Shares were above $80 in mid-February.

More than 36,000 BHP options traded on Friday, compared to a daily average of 4,600 in the last month.

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