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Bear sets sights on CommonWealth

Chris McKhann (chris.mckhann@optionmonster.com)

CommonWealth REIT drew a large downside trade yesterday even as shares rebounded.

A trader bought 13,975 July 20 puts for the ask price of $1.40 and sold the same number of May 20 puts for the bid price of $0.55, according to optionMONSTER's Depth Charge tracking system. The volume at each strike was multiples of the previous open interest, indicating new activity.

This calendar spread cost the trader $0.85, which is the most that can be lost until the first expiration. The maximum gain comes if shares are right at $20 at that time as the time decay is greater in the nearer-term options. (See our Education section)

CWH gained 3.04 percent yesterday to close at $22.69, in the middle of the recent range. Shares gapped up from below $16 on Feb. 25 to above $25 later that week after the real-estate investment trust released its last earnings results.

More than 33,000 CWH options changed hands in total yesterday, compared to a daily average of 5,500 in the last month.

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