Eagle Bulk Shipping has been dropping for the last week, and this week the bottom fell out.
The carrier of commodities such as coal and iron ore plunged 11 percent on record volume of more than 12 million shares. Option activity surged to 10,804 contracts versus the 1,003 daily average, as investors piled into puts that positioned for more downside.
OptionMonster's tracking systems detected heavy buying in the March 4, February 4, September 4, and June 4 contracts. The March puts were the most active, with 1,700 trading for prices ranging from $0.10 to $0.25.
Monday saw the purchase of 3,500 of the March puts for $0.05 and $0.10, so it appears that at least one trader was looking for yesterday's big drop.
Eagle stock ended the session at $4.01, about the same level where it bottomed in July before rallying back with the rest of the market. The upside lasted for a few months, but then the stock slammed into resistance at its 500-day moving average and started trending lower once again.
The ocean-shipping companies have mostly lagged the rest of the market since the 2008 crash. Others such as DryShips , Diana Shipping , and Overseas Shipping Group also failed at their respective 500-day moving averages late last year.
Puts accounted for a bearish 62 percent of the overall option volume in EGLE during yesterday's session.
Russell has no positions in any of the stocks mentioned in this article.
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David Russell is a reporter and writer for OptionMonster.