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The Blackstone Group L.P. (BX) Traders Expect Underfoot Support

A huge block of The Blackstone Group L.P.'s March 29 puts was sold to open

by 2/11/2014 10:08 AM
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Put traders poured into The Blackstone Group L.P.'s (NYSE:BX) options pits yesterday, as roughly 26,000 contracts crossed the tape -- four times the typical daily put volume, and six times the number of calls traded. Dominating the action was the private equity firm's March 29 put, which saw nearly 22,000 contracts change hands, including a block of 19,000.

The vast majority of the volume at the out-of-the-money strike occurred at the bid price, and open interest skyrocketed overnight, together suggesting newly minted neutral-to-bullish bets. By selling the puts, the traders expect BX to remain perched atop the $29 level at the closing bell on Friday, March 21, when the options expire. The shares closed at $31.55 yesterday.

If the options expire out of the money, then the put writers will retain the entirety of the initial premium received. However, if the security tumbles south of the strike price, then the sellers could be assigned -- in which case, they'd be forced to buy back the stock at $29 per share, no matter how far it's fallen. Looking back, Blackstone hasn't closed south of that level since Dec. 12.

Yesterday's penchant for puts over calls reflects a prevailing trend among short-term traders. After all, Schaeffer's put/call open interest ratio (SOIR) for BX checks in at 1.82, with put open interest outweighing call open interest among options expiring in the next three months. More significantly, the SOIR registers at the top of its annual range, meaning the bias toward short-term puts (over calls) has never been greater during the last 12 months.

On the fundamental front, news broke yesterday that The Blackstone Group L.P. (NYSE:BX) is taking hotel chain La Quinta Holdings Inc. public, after taking it private in 2006. This follows another BX-led hotel IPO -- of Hilton Worldwide Holdings Inc (NYSE:HLT) -- in December.


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