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Crash protection bought in Concho

David Russell (david.russell@optionmonster.com)

Concho Resources has dropped to a key level, and one investor apparently thinks that it may continue falling.

optionMONSTER's Depth Charge tracking system detected the purchase of 1,700 January 75 puts for $2.40 and the sale of an equal number of January 85 calls for $1.30. Volume was more than triple open interest at both strikes.

The trade resulted in a cost of $1.10 and will profit from downside in the Midland, Texas-based energy driller. It also obligates the investor to sell shares for $85 if they reach that level and locks in a minimum selling price of $75. He or she may own shares and be using the strategy as a hedge, in which case it's known as a collar . (See our Education section)

CXO is down 1.07 percent to $77.94 in morning trading and has lost 9 percent of its value in the last six months. It's now back around the same level where it bounced in June and mid-2011, which could be leading some chart watchers to expect a bounce or a big drop if support is broken.

Total option volume is 4 times greater than average in the company so far today, according to the Depth Charge.

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