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Bears Want to Maul Paychex

David Russell|Writer, OptionMonster
Thursday, 27 Sep 2012 | 5:50 AM ET
Rose / Mueller | Stock4B | Getty Images

Paychex’s quarterly results disappointed investors earlier in the week, and now the bears want revenge.

OptionMonster’s tracking programs detected the purchase of about 5,900 October 33 puts for $0.44 to $0.50. Volume was 11 times open interest in the strike.

Owning puts locks in the price where investors can sell a stock, so the lower it goes, the more the they are worth. These options can be used as insurance policies to protect long positions, but are also ideal for outright bearish trades.

Paychex shares fell 0.72 percent to $33.17 yesterday. It gapped lower in the previous session after the company reported a lackluster quarter, with earnings beating expectations by a narrow margin, but revenue missing the mark.

Given that the stock was near multiyear highs when the news came out, expectations were very optimistic. Based on yesterday’s trades, the bears apparently believe that further selling may now take place.

Total option volume was more than seven times greater than average in the session, with puts accounting for more than 80 percent.

—By CNBC Contributor David Russell

Additional News: Paychex CEO Talks Future Growth

Additional Views: Bulls Expect a Rally From GrafTech: Russell

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David Russell is a reporter and writer for OptionMonster. Russell has no positions in PAYX.

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