Bears Prowl Autodesk Before Earnings

Feb.23.11 | About: Autodesk, Inc. (ADSK)

By David Russell

Autodesk (NASDAQ:ADSK) reports earnings tomorrow afternoon, and investors are selling now and asking questions later.

optionMONSTER's tracking systems detected a surge of activity in the March 43 calls, which changed hands more than 7,000 times. Most of the trades priced at the bid price, which indicates they were sold rather than bought.

Investors write calls when they think that upside is limited. The strategy lets them earn income on underlying positions in a stock while capping their potential exit price at the strike level. It also lets them capitalize from a drop in premiums that tend to occur after results come out. (See our Education section)

ADSK fell 3.02 percent to $40.85 in late morning trading and is down more than 4 percent since mid-February, when it hit a three-year high of $44.44. The maker of design software has been rallying along with most other technology stocks but seems to be rolling over and today slipped below its 50-day moving average for the first time since the summer.

The company's last earnings report on Nov. 18 was about in line with consensus estimates, with revenue slightly better than expected.

Investors also positioned for downside in ADSK, buying more than 2,000 March 41 puts and about 1,800 March 37 puts.

Overall options volume in the name was 12 times greater than average.