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Unusual downside trade in Starwood

Chris McKhann (chris.mckhann@optionmonster.com)

Starwood Hotels & Resorts is facing an unusual bearish strategy while the stock trades just below its 2012 highs.

A trader sold 2,500 February 65 calls for $0.48 against previous open interest of 418 contracts, according to optionMONSTER tracking systems. At the same time, he or she bought 2,800 May 57.50 puts for $2.85 against open interest of 213 at that strike.

The result is a bearish combination trade, but one that uses different expirations and quantities. The selling of the nearer-term calls was likely done to take advantage of the greater time decay , and the overall position could very well be a type of protective collar on long shares. (See our Education section)

Starwood saw another trade in the afternoon, as 2,500 May 60 calls were sold for $4.15 against previous open interest of more than 8,600 contracts while 4,000 May 65 calls were bought for $2.12 against open interest of 1,215.

HOT gained 1.34 percent on Friday to finish the week at $60.38, its highest close since Sept. 17, which was one session after reaching a 52-week intraday peak of $60.91. The stock has been climbing steadily since bouncing off support near $50 in mid-November.
optionMONSTER systems show that more than 17,000 HOT options changed hands on Friday, compared to a daily average of 7,000 in the last month.

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