Bears Bite Into Darden Restaurants
Shares of Darden Restaurants have been declining since last fall, and the bears apparently want to send the stock even lower.
OptionMonster's tracking programs detected the purchase of about 6,500 March 45 puts against previous open interest of just 1,425 contracts. The initial blocks priced for $0.60, but then ratcheted higher as the stock pushed lower and they ended the session worth $1.30.
This puts lock in the price where investors can sell shares no matter how low they may fall. That gives them a strong inverse correlation to the stock, making them behave similarly to short selling. The advantage of the strategy is that it can lose no more than the initial cost of the options.
Darden shares fell 0.88 percent to $44.85 yesterday. Shares gapped violently lower in December after management acknowledged that attempts to stir up business with promotions had failed. The stock then consolidated, but has been hitting resistance at its 50-day moving average in recent weeks. This could make some traders think that it will proceed to make new lows.
The company will also be hosting a conference with analysts on Monday and Tuesday. Its brands include Olive Garden, Red Lobster, and LongHorn Steakhouse.
Total option volume was 15 times greater than average in the session. Puts accounted for a bearish four-fifths of the total.
—By CNBC Contributor David Russell
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David Russell is a reporter and writer for OptionMonster. Russell has no positions in DRI.