U.S. Markets close in 5 hrs 21 mins

Trader sees limit to SandRidge drop

Chris McKhann (chris.mckhann@optionmonster.com)

SandRidge Energy is tumbling after reporting earnings results this morning, but a large trader apparently believes that losses will be limited in the long run.

A trader sold one block of 9,288 January 2014 3 puts for the bid price of $0.35, according to optionMONSTER's tracking systems. Open interest in the strike at the start of the session was 3,137 contracts, so this is a new position.

The put seller is betting that SD will hold above $3 through expiration but won't see tremendous upside either. The trader is also taking advantage of the elevated implied volatility of these options, which is at 67 percent while the 30-day historical volatility was 37 percent at the beginning of the day. (See our Education section)

SD is down 7.7 percent to $5.62 after dipping to $4.81 at the open. The independent gas and oil company had been holding support at $7 through October but is now trading at 52-week lows.

More From optionMONSTER