Expiration Trade Behind Osiris Activity

By Chris McKhann

As we close in on expiration at the end of today's session, traders are rolling out positions that they don't want to be without going into Monday. That's what we are seeing today in Osiris Therapeutics (OSIR), where traders are rolling put positions out a month.

The stem-cell therapeutic company is up 1.85 percent on the day to $6.60 but remains near its lows. OSIR was trading higher than $20 a year ago and was still above $15 as recently as August. The price has hovered between $6 and $7 for months, other than a quick dip to the low of $5.35 at the beginning of November.

The November puts go off the board at today's close, and one trader is unloading 3,000 November 7.5 puts for $0.85, representing most of the open interest. Seconds later we see 3,000 of the December 7.50 puts bought for $1.40. There was no open interest at that strike, so this is a new opening position.

The use of the in-the-money puts increases the overall cost but also reduces the time premium. Given the limited risk, many traders choose in-the-money puts as opposed to short stock.

Today's action also likely represents an outright bearish position, as traders don't usually use front month, in-the-money puts as a hedge or protection.

(Chart courtesy of tradeMONSTER)