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St. Jude receives a vote of confidence

David Russell (david.russell@optionmonster.com)

St. Jude Medical is pulling back, but one investor apparently thinks that the stock is on solid ground.

optionMONSTER's tracking systems detected the sale of about 2,800 October 35 puts for $2 and 1,100 October 30 puts for $0.85. There was barely any open interest in either strike before the session began.

The trades occurred less than five minutes apart, suggesting that they were the work of single investor. He or she is now obligated to buy shares in the medical-device company if they close at $35 and $30 on expiration. Above those respective levels, the contracts will expire worthless and the the seller will keep the premium.

STJ is down 3.39 percent to $39.91 in midday trading. It rallied from below $33 in mid-December to near $44 last month but has been falling since. The stock now seems to be finding support around its 50-day moving average, the same level where it peaked late last year.

That technical setup could be leading some investors to believe that support is in place, providing confidence that downside will be limited. Investors often sell puts when they like a stock because it lets them make money without spending capital. (See related column by Chris McKhann)

Overall option volume in the name is triple the daily average so far today.

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