How trader is playing CEDC downside


Central European Distribution spiked higher yesterday, but one trader is positioning for a sharp pullback.

More than 2,800 April 4 puts traded in a strong buying pattern yesterday, most of them going for $0.35 and $0.40. The volume was more nearly 3 times the previous open interest at the strike, so it represents new activity.

CEDC surged 13.86 percent yesterday to close at $4.60. Shares gapped down from $5.42 after the company badly missed earnings expectations on Feb. 29. The New Jersey-based company distributes alcoholic beverages around the globe, primarily in Poland, Hungary, and Russia.

Our systems did not detect any stock trades tied to yesterday's option activity, though the puts could have been purchased as protection on an existing long position. The trade could also have been a straightforward bearish bet.

Either way, the puts bought yesterday would make money if the stock falls roughly 20 percent by the time they expire in six weeks. (See our Education section)

Yesterday's trading pushed the total CEDC option volume to nearly 3 times its daily average. Overall puts outnumbered calls by more than 4 to 1, reflecting the session's bearish sentiment.

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