Washington Federal (WFSL), a Seattle-based savings and loan, is down 33 cents to $14.95 and total options volume is running more than 100X the average daily. The activity is heavily concentrated in Jan10 puts at the 15 strike. 3,439 traded, compared to open interest of 472. Looks like buyers dominating the action, as two thirds hit ask-side and WFSL implied vols (average) moving up to 43, from about 35 late Friday.
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Washington Federal Inc (WFSL) $14.94 -2.23%
Posted on August 31st, 2009 2:40 pm
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6 users commented on " Washington Federal Inc (WFSL) $14.94 -2.23% "
Follow-up comment rss or Leave a TrackbackIs it fair to say that when someone buys puts that far out – they’re just investors looking to protect their positions over the longer term?
Not necessarily. Time decay will impact short-term puts at a faster rate. Buying in-the-money puts with more time left until expiration might be way to position for a move lower in the stock, but when the timeframe for the move is less certain and you don’t want as much theta decay.
But, you are right, it is also a possible hedge. It’s tough to say. Watching for follow up activity can sometimes give a sense of whether or not bearish sentiment is really building
The above simply shows you that puts were traded, that’s all.
Usually what I do is look at the rest of the option chain and follow it.
Fred brings up a good point. I shorted MAC JAN 2010 2.5 puts myself from March lows and played it out. Now MAC is like a $20 stock. I was actually willing to “own” MAC @2.5 in JAN 2010, unfortunately it never worked out, so collected the premium by buying back my “short” puts.
My fault, missed that the buyers are in control on this one Fred, so not a good comparison against my MAC (although MAC *did* work out eventually). These are the type of stocks I add to my watch list and await the good news…..hehe
That’s the only things that stink about options, you usually have to do about 2-3 hours of research minimum IMHO (on the underlying stock) to find out if the investment makes sense to you.
The reason I mentioned this is that I recently bought Jan 12.5 puts on NUAN myself – I intend to be a long term holder of the stock and my buy point is around 12.5. I actually hope my puts will expire worthless because I hope the stock will have made a move to more than pay for the price of the puts. Usually when bears make a raid – they’re buying nearer term puts. Bear raids are usually fast and furious. Buying longer term puts just doesnt seem to me to be a popular bear style.
yes, good hedge strategy, but buying stock @12.5 doesn’t seem to pay for the puts……
or perhaps I’m thinking out loud?
Good on the timeframe though if you do get a drawdown, plenty of time for NUAN to rally and you get very cheap protection. If it shoots up fast too you can sell the implied vol on the puts….good strategy. Perhaps I shouldn’t complain. I did the same with PQ into earns a coupla months ago (considering PQ was making 20% intraday moves, the puts came in well, so I sold common stock AND puts).