By David Russell
Mindray Medical (MR) plunged on a weak revenue number yesterday, and now traders expect it to stop moving.
optionMONSTER's tracking systems detected heavy selling of calls and puts on the Chinese company, which touched its lowest level since November yesterday. The selloff pushed implied volatility in the name to a seven-month high of 48 percent--an ideal environment for selling options. It was just 33 percent a month ago.
Traders sold almost 1,900 the June 30 puts less than an hour after the open, mostly for $0.87 to $0.92. About midway through the session, about 2,400 June 35 calls were written for $0.65. Volume was more than 10 times open interest in both strikes.
MR fell 8.06 percent to $32.18 yesterday and is down 15 percent in the last week. The medical-device maker's earnings beat estimates despite sales falling about 6 percent short of the consensus estimate. Selling options will let investors collect income from the shares remaining stuck in a range.
The stock appears to have support around $30 to $31 because that's where it consolidated between August and December. It may also face resistance at about $35, which provided support earlier this year. Traders may have identified the levels on the chart and belief the stock will remain trapped between them.
Yesterday's activity pushed total options volume in MR to 15 times greater than average.
(Chart courtesy of tradeMONSTER)