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CF rebound draws bearish paper

David Russell (david.russell@optionmonster.com)

CF Industries has battled back to potential resistance, and the bears are stepping in.

optionMONSTER's Depth Charge tracking program detected the purchase of almost 3,800 November 170 puts, most of which priced for $2.65. Volume was more than quadruple previous open interest at the strike, indicating that new positions were initiated.

Puts lock in the price where the fertilizer stock can be sold. That gives them an inverse correlation to the shares, letting traders hedge long positions or speculate on a drop. (See our Education section for more on how to leverage directional moves with options.)

CF is up 1.37 percent to $196.96 in midday trading but down 14 percent since the start of February. It's been trying to rebound in the last two months and has now returned to its 200-day moving average. The shares stalled around that level in late July, and today's option trader is looking for it to be resistance once again.

More than 6,800 contracts have changed hands so far in the session, roughly triple the daily average. Puts outnumber calls by a bearish 3-to-1 ratio.

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