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What's behind bearish action in Dick's

David Russell (david.russell@optionmonster.com)

Dick's Sporting Goods is trying to hold a key level, and investors are positioning for a potential pullback.

optionMONSTER's Depth Charge monitoring program detected the purchase of about 1,200 October 50 puts for $0.75 and the sale of an equal number of October 50 calls for $2.05. The investor collected a credit of $1.30 and will earn infinite profits on a drop below $50.

He or she is also obligated to sell shares for $50 if they close above that level on expiration, but the exit price would be $51.30 including the credit earned. The trader probably made money on a long position in the stock and is now using the options to protect those gains .

A second bearish transaction appeared near the end of the session. This time 1,000 November 50 puts traded for $1.55 and a matching number of November 45 puts were sold for $0.45. Known as a bearish put spread , the strategy cost $1.10 and will earn a maximum profit of 355 percent at or below $45. (See our Education section)

DKS fell 0.17 percent to $51.85 on Friday. The specialty retailer is up 8 percent in the last three months and is attempting to hold support above its previous all-time high from early August.

Overall option volume was 10 times greater than average in the session, according to the Depth Charge.

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