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Pullback expected in WisdomTree

David Russell (david.russell@optionmonster.com)

WisdomTree Investments has been rallying hard, but yesterday traders were looking for a pullback.

optionMONSTER's Depth Charge monitoring system detected the purchase of 16,000 January 17.50 puts for $1.20. Volume was more than 48 times open interest at the strike, indicating that new positions were initiated.

Puts lock in the price where shares can be sold, so they move in the opposite direction as the underlying stock. Yesterday's transaction was noteworthy because it involved in-the-money contracts, which have more exposure to the downside. This suggests that they were used as a speculative short instead of a protective move . (See our Education section)

WETF rose 6.95 percent to $17.23 and is up 42 percent in the last three months. It's been growing at a torrid pace as its exchange-traded funds receive new inflows and is expected to continue its rapid expansion. Earnings have met or beaten expectations for at least the last four quarters.

Overall option volume was 32 times greater than average in the session, according to the Depth Charge. Puts accounted for a bearish 88 percent of the total.

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