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Bearish play dominates in JDS Uniphase

David Russell (david.russell@optionmonster.com)

JDS Uniphase has been weak of late, and nerves are on edge.

optionMONSTER's Depth Charge monitoring program detected the purchase of more than 9,000 May 13 puts, most of which priced for $0.63. Volume was more than twice open interest at the strike, indicating that new trades were initiated.

The puts lock in the price where the fiber-optic company can be sold, so they will move in the opposite direction of the stock price. Investors buy these options to insure long positions or to speculate on a drop. (See our Education section)

JDSU fell 2.27 percent to $13.15 in early afternoon trading and is down 10 percent in the last two months. The Nasdaq 100 and S&P 500 have both climbed over the same period, which shows that money has been flowing into other names.

Shares have fallen despite strong earnings in late January, which caused the stock to gap higher briefly. The next quarterly report is scheduled for after the bell next Wednesday, May 1, and today's put buyer may be worried about a bad release.

Overall option volume is 5 times greater than average in the session, according to the Depth Charge. Puts account for more than four-fifths of the total.

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