Traders Buy Puts in L-1, Cypress Semi

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Options trading activity this morning has focused on several large long put trades in two struggling stocks.

L-1 Identity Solutions (NYSE:ID) continues to fall after the security-technology company posted earnings last night.

ID is trading around $10.76, giving up another nearly 3% this morning. Shares were a $1 higher last week, but have been increasingly plagued by concerns about the pending acquisition by French aerospace company Safran.

Average option volume in ID is just over 1,000 contracts, but more than 9,600 have already traded this morning. Most of the activity is in the ID July 9 Puts, which have traded in institutional size as blocks of 3,700 and 2,260 were bought for $0.40. The previous open interest was just 48 contracts, so these were new opening positions.

This put buying could be a straight bet on further downside but could also be  protective positioning on long shares, though both plays would indicate that the trader is late to the game.

The average implied volatility (IV) has risen from 14 a month ago to 47%. Those puts have an IV of 65% and even with the recent swings the 10-day historical volatility is only 17%.

Find more option analysis and trading ideas at  Options Trading Strategies.

Cypress Semiconductor (NASDAQ: CY) is seeing heavy put buying as shares meet resistance.

CY is up about 1.5% on the day to $22.07, an area of resistance since shares came off their two-year high near $24 back in mid-February. The stock has been trading between this resistance and downside support at $18 that it bounced off three weeks ago.

Today’s options trading in CY is dominated by one print in the CY July 21 Puts, as one trader bought 4,000 of those contracts for $0.60. This was almost four times the previous open interest at that strike, so it is a new position.

The put buying could be an outright bearish bet that CY will drop back to where it was just a week ago. It also could be protective hedging with the trader buying puts against an existing long stock position. The latter would show concern for a pullback but overall is quite bullish.

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Article printed from InvestorPlace Media, https://investorplace.com/2011/05/traders-buy-puts-in-l-1-cypress-semi-cy-id/.

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