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Why trader is selling puts in ADT

Mike Yamamoto (mike.yamamoto@optionmonster.com)

ADT has been range-bound since late January, and one trader is betting that current levels will hold for the several months.

optionMONSTER's tracking systems detected the sale of 2,500 October 30 puts in one print yesterday for the bid price of $1.50. The volume was above the strike's previous open interest of 2,194 contracts, showing that this is a new position.

The put seller is looking for ADT to stay above $30 through expiration in mid-October, at which time the $1.50 would be booked as profit. But if the stock falls below the $30 strike price, the trader will be on the hook to buy shares at that level.

The electronic-security systems company saw bullish call buying in the June 30 strike about two weeks ago.

ADT fell 0.26 percent to $32.06 yesterday but is still near the top end of a range that has been in place for nearly four months. The stock gapped down from the $38 level after quarterly results in late January and pulled back again on ADT's latest report on April 30. (See our Education section)

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