H&R Block, Inc. (HRB) Bearish Option Plays
Bearish investors bombarded the provider of tax, banking, business and consulting services in afternoon trading yesterday after Standard & Poor's Ratings Services lowered its rating outlook on the company to stable from positive.
The downgrade weighed heavily on HRB's shares, which fell as much as 6.20% to an intraday- and new 52-week low of $12.54.
Given the new 52-week low of $12.54, HRB's shares are down 21.5% since trading at $15.97 on August 2, 2010. The stock has lost a total of 46.15% of its value since January 21, 2010, when shares reached the current 52-week high of $23.29. Investors wary of continued bearish movement in the price of the underlying stock are picking up put options on H&R Block like they are going out of style.
- More than 22,000 puts traded at the October $10 strike versus previously existing open interest at that strike of just 340 put options
- It looks like bears bought at least 11,700 of those puts for an average premium of $0.18 apiece
- Another 7,400 puts traded to the middle of the market at the October $10 strike
Another Option Play Driven by News
Thinking bearish can also lead to other strategies. Consider a Bear Call Spread. Looking into October, sell a 14 call & buy a 15. This gives one a $5 credit per contract. Not bad for a quick 100 contract play. Or one may consider selling a naked call. Sell the 15's, possibly 100 of them at $10 each. There are a number of strategies that are available if you think creatively.
Disclosure: "No Positions"