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Options Bet on Retail, Multinational Downturn

Wednesday, 13 Aug 2008 | 12:22 PM ET

Options traffic is signaling some bearish expections for retail and multinationals in the coming months, according to one analyst.

Moves in options for S&P retail ETF indicate that traders are looking to protect themselves against a drop in the sector, said Rebecca Darst on CNBC Wednesday.

Markets & Retail
Insight on how the retail sales figures have impacted the markets, with Rebecca Darst, Interactive Brokers and Marc Pado, Cantor Fitzgerald

"What this tells us is that at least in the minds of these option traders, they're looking into some downside heading into September," said Darst. "... We are seeing option traders positioning, perhaps, for getting back some of the gains we've seen over the past month in the retail space, but with a downside limit. We shouldn't, at least according to these trades, see a real test of the 52-week lows." (See her full comments in the video).

That negative sentiment also seems to extend to financials, she indicated.

"You can take this for what you will, but we have noticed some positioning, if not defensively, then certainly in favor of some limited upside momentum in the likes of McDonald's in the December and January contracts," Darst said. (Check McDonald's options traffic here).

"Just to mention another multinational company, we normally don't see a lot of trading activity in the likes of something like Procter & Gamble , but it did show up in our option-trading screens yesterday, this with heavy buying at the January 65 put strike, so, again, that could be some defensive positioning in those large multinationals. What I think is interesting in this respect is that traders are targeting December and January for those possible moves lower." (Check P&G options traffic here).

See Darst's full multinational comments here.

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