Why trader is selling puts in Mechel

optionMONSTER

Mechel is pulling back again today, but one trader apparently believes that the Russian mining and steel company will hold current levels.

A trader sold 5,000 November 7 puts for the bid price of $0.50, according to optionMONSTER's tracking systems. Open interest in the strike was just 120 at the beginning of the day, so this is clearly a new position.

MTL is off 0.48 percent to $7.24. It was above $8 last week, the highest level since the start of May. Shares hit a 52-week low of $5.08 a month later and have been slowly trending higher since then.

The put selling is a bet that MTL will hold up above $7 through that expiration. Given how close the strike is to the stock price, the trader is also willing to buy shares if they are assigned but would have an effective buying price of $6.50 including the credit for the puts. (See our Education section)

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