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Outerwall Inc (OUTR) Bear Rolls Out a Winning Strategy

An Outerwall Inc options trader raised the bearish stakes on a put position

by 7/11/2014 10:32 AM
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Options were unusually active on Outerwall Inc (NASDAQ:OUTR) in Thursday's session, with 9,283 puts and 1,819 calls changing hands -- more than doubling the stock's average daily option volume of fewer than 4,100 contracts. Taking a closer look, it seems that much of the put activity on OUTR was driven by the roll-out of a successful bearish play.

Specifically, one trader sold to close a block of 2,400 October 65 puts for $11.79 each, and simultaneously bought to open a block of 2,400 January 2015 50-strike puts at $4.24 each. In other words, an OUTR bear is rolling his puts out to a later month, and down to a lower strike, in order to bet on longer-term losses for the stock.

Yesterday was the second-biggest volume day for the equity's October 65 put. Previously, on June 11, a block of 5,000 contracts was bought to open at this strike -- and on the same day, a substantial number of July-dated puts were closed out. So, it seems likely that Thursday's put-roll player has been capitalizing on OUTR's technical weakness for a while now.

On the charts, Outerwall Inc (NASDAQ:OUTR) has shed 18.9% year-to-date to trade at $54.55. Since hitting an all-time high of $74.30 on March 5, the stock has tumbled nearly 27%. Amid this slide, put players have been active. Schaeffer's put/call open interest ratio (SOIR) for OUTR stands at 2.38, in the 95th annual percentile -- revealing short-term options traders have rarely been more put-heavy in the past year. Meanwhile, a hefty 46.1% of the stock's float is sold short.


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