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Put seller targets General Dynamics

Mike Yamamoto (mike.yamamoto@optionmonster.com)

General Dynamics has been dropping steadily along with the rest of the defense sector since President Obama's reelection, but one trader is betting on a floor beneath the stock.  

optionMONSTER's tracking systems detected the sale of 3,500 January 52.50 puts in a single print for $0.40. Open interest in the strike was 527 contracts at the start of the session, so this is clearly a new position.

The put seller is looking for GD to be above the $52.50 strike price at expiration in mid-January. Below that level, the trader faces the obligation to buy the shares at an effective price of $52.10 once the credit from the put sale is factored in. (See our Education section)

GD closed fractionally higher yesterday at $62.14. The defense contractor's shares plunged from above $69 immediately after last week's election on fears of further cuts in Pentagon spending in the second Obama administration, breaking below several key moving averages.

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