Western Union tried to bounce yesterday, but the bears had other ideas.
optionMONSTER's Depth Charge tracking program detected the purchase of more than 18,000 February 13 puts for $0.15 and $0.20. Volume was more than quadruple previous open interest at the strike, indicating that new positions were initiated.
Those contracts lock the right to sell shares in the money-transfer company for $13 in the next three weeks, no matter how far they may fall. That can result in significant leverage if the shares drop, but the puts can expire worthless if the stock fails to decline. (See our Education section)
WU rose 3.62 percent to $14.02 yesterday but has lost more than one-fifth of its value in the last three months. Most of that drop occurred on Oct. 31 after revenue missed expectations and management cut guidance because of increased competition.
The stock has been attempting to rebound since then. However, based on yesterday's option trade, at least one big investor expects more bad news when the next earnings report is released after the closing bell on Feb. 12.
Some 31,500 Western Union contracts traded in the session, almost 17 times the normal amount. Puts accounted for almost 90 percent of the total, according to the Depth Charge.
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