By David Russell
ArvinMeritor (ARM) has rallied 27 percent in the last month, and now traders are looking for a pullback.
OptionMONSTER's Depth Charge tracking program detected unusual activity in the January 10 puts, which traded 4,338 times against of 780 contracts. Most of the transactions were purchases for $0.30 and $0.35.
ARM is up 0.8 percent to $11.31 in midday trading. The maker of heavy-truck components has been climbing on signs the U.S. economy is recovering, and after bulls targeted related companies earlier in the month.
On Dec. 15, ARM forecast a third straight quarter of positive cash flow and said revenue would increase on a sequential (quarter-over-quarter) basis.
Today's put buyers seem to think ARM has moved too far too fast and are positioning for a move back toward $10. They implemented their positions a day after ARM hit resistance at the $11.75 level that provided support in July 2008.
The trades pushed overall options volume in ARM to five times greater than average. Puts outnumbered calls by 124 to 1.
(Chart courtesy of tradeMONSTER)