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Sodastream International Ltd (NASDAQ:SODA) followed the broad-market trend higher yesterday, picking up over 4% to close at $64.59. Meanwhile, in the company's options pits, overall volume soared to nearly four times its daily average. The session's most active strike was the weekly 9/13 64-strike put, where over 3,000 contracts traded.
The vast majority of the trades at the strike went off at the ask price, suggesting the puts were purchased. Meanwhile, overnight open interest gained more than 2,200 positions, hinting at buy-to-open activity. Data from the International Securities Exchange (ISE) confirms a portion of the puts were, in fact, newly initiated bearish bets.
Looking more closely, we notice that more than half of the strike's volume was the result of a single speculator, who bought to open a 1,744-lot of the SODA puts for $0.75 each. For him to profit, the shares must descend past $63.25 (the strike price less the premium paid) by the closing bell this Friday, when the weekly options expire. Should Sodastream International, which currently hovers at $64.78, remain above the strike through week's end, the most the trader has at stake is the initial cash outlay.
During Tuesday's session, delta for the option dropped to negative 0.42 from negative 0.73 -- an indication that the puts became less likely to finish in the money, due to the underlying's positive price action. At the same time, the stock's 30-day, at-the-money (ATM) implied volatility (IV) surged 5 percentage points, or 11.5%, to 48.8%. This morning, SODA's ATM IV is marginally lower at 48.5%.
All things considered, we shouldn't assume all of yesterday's weekly put buyers were bears. In fact, given Sodastream International Ltd's (NASDAQ:SODA) strong performance on the charts -- not only yesterday, but for all of 2013, during which the shares have gained almost 45% -- the traders may have purchased the puts as short-term, downside protection for their long stock positions.
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