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Sirius XM Radio Inc (SIRI) Bear Bets On Multi-Month Low

One speculator scooped up SIRI's September 2.50 puts today

by 4/4/2013 2:47 PM
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Sirius XM Radio Inc (NASDAQ:SIRI) is trading lower today, and one speculator is betting on the stock to continue its retreat to levels not seen since last September. Around 11:00 a.m. ET on the International Securities Exchange (ISE), one block of 1,000 September 2.50 puts traded at the ask price of $0.09. Volume is easily outpacing open interest, and data from the ISE confirms that these positions were, indeed, bought to open.

In order for the deep out-of-the-money puts to be profitable, SIRI must fall below breakeven at $2.41 (strike less premium paid) by September expiration. As mentioned, Sirius XM Radio Inc (NASDAQ:SIRI) has not traded at this mark on an intraday basis since Sept. 19. Delta for the put is currently docked at negative 0.18, or 18%, implying a roughly 1-in-5 chance the position will land in the money by expiration. Should the stock fail to breach the strike price over the next five months, the most today's put buyer has risked is the net debit paid.

Widening the sentiment scope reveals option players have been optimistically aligned with SIRI in recent weeks. During the past 10 sessions, speculators at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 9,402 calls, compared to 690 puts, bringing the stock's 10-day call/put volume ratio to 13.63. What's more, this ratio ranks higher than 77% of other such readings taken in the past year, pointing to a healthier-than-usual appetite for bullish bets over bearish.

Technically, Sirius XM Radio had a solid start to the year, but lost some of its steam after trading in four-year high territory throughout February. The shares have shed roughly 6% since last touching the $3.25 mark on March 6. This downward trajectory is continuing in today's session, with the stock 0.8% lower at last check to linger near $3.05.


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