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Bears take second bite at JDS Uniphase

Mike Yamamoto (mike.yamamoto@optionmonster.com)

JDS Uniphase is drawing heavy downside trades for the second time in recent days.

optionMONSTER's Depth Charge system detected the sale of 7,500 May 15 puts for $1.55 and the purchase of 11,000 May 13 puts for $0.56. Volume was below the previous open interest in the May 15s but above it in the May 13s.

This indicates that a trader is rolling a bearish position lower in a reflection of the declining share price, using profits from the sale of the initial puts to purchase more contracts at the lower strike. Puts lock in the price where the stock can be sold no matter how far it might fall.  

These options could be a hedge on a long stock position or an outright bet that JDSU will fall below $13 by mid-May. If shares stay above that strike price, however, the puts will expire worthless. (See our Education section)

This is the second time that our scanners have found bearish activity in the name recently. On March 12 traders bought the April 15 puts for prices that have more than doubled since then.

JDSU is down 4.34 percent to $13.68 in midday trading, breaking below its 50-day moving average. The telecom-equipment maker has been falling since it hit resistance around $15.50 earlier this month at its highest level since July 2011.  

Today's activity pushed overall option volume in JDSU to above 20,400 contracts, more than 7 times its daily average of 2,690 in the last month. Only 1,244 calls have traded so far, a reflection of the session's bearish sentiment.

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