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Bears refuse to let go of NII Holdings

David Russell (david.russell@optionmonster.com)

NII Holdings tried to mount a significant rally yesterday, but the bears had other ideas.

The emerging-market telecom was up almost 4 percent at one point in the session, but then optionMONSTER's Depth Charge monitoring program lit up with activity in the June 6 puts. Some 1,500 contracts were bought, mostly for $1.05 and $1.10, in volume that was well above the strike's previous open interest of just 181 contracts.

NIHD fell immediately yesterday morning and ended the session up 1.54 percent at $5.92. The stock has been trending steadily lower since mid-2007, losing about three-quarters of its value in the last year alone.

Weighed down by heavy debt and consistently weak earnings, NIHD has been a favorite among the bears. Short interest accounts for about 40 percent of the float.

Yesterday's put buyers now have the right to sell NIHD for $6 in the next four months regardless of how far it declines. That provides leverage to the downside.

The contracts may have been purchased by an investor looking to hedge a long position in the name. Alternatively, the trade could be the work of a speculative bear who doesn't want to face the risk of a potential short squeeze by selling the stock. (See our Education section for more on how options can be used to manage risk.)

More than 2,400 contracts traded in the session, according to the Depth Charge. Puts outnumbered calls by a bearish 8-to-1 ratio.

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