One investor apparently wants more time to repair a losing trade in Ultra Petroleum.
optionMONSTER's tracking programs detected the sale of 22,440 January 25 puts for $4.40 and the purchase of an equal number of September 25 puts for $4.10. Volume was below open interest at the shorter-dated strike, indicating that an existing short-put position was closed and rolled forward in time.
Selling puts obligates the investor to buy a stock at the strike price if shares are below it on expiration. In yesterday's case, he or she apparently sold puts at an earlier time when UPL was over $25, looking for it to hold that level. But then the stock fell below it, and the trader faced the prospect of being forced to get long at an above-market price.
So the trader rolled the position forward in time, collecting an additional $0.30 of premium and securing another four months for the rebound to occur. The trade can still lose money if the stock falls enough during that time. (See our Education section)
UPL rose 1.06 percent to $20.92 yesterday and has been churning in a range for more than a year. It broke below $25 in early 2012, bottomed around $15 last February, and has been working higher since. The stock has been holding above its 200-day moving average in recent months, which could make some chart watchers think that it's due for a recovery.
Total option volume was 26 times greater than average in the session.
More From optionMONSTER
- Youku traders tune in for breakout
- VMware bulls bet rally will resume
- Videocast: 'War play' in VIX trade
- Stocks & Offerings