Rio Tinto has fallen to 18-month lows, and traders are positioning for more potential losses.
optionMONSTER's Depth Charge system detected the purchase of about 4,000 April 40 puts for $2.44 and $2.50 yesterday. Open interest in the name was just 530 contracts before the trades appeared, showing these are new positions.
These puts lock in the price where the stock can be sold no matter how far it might drop, gaining value in a selloff. They could have been purchased either as an outright bearish bet or a hedge on a long position, but either way they will expire worthless if shares remain above $40 through mid-April. (See our Education section)
RIO was down 1.97 percent to close at $42.90 yesterday. The mining and materials company dropped to $42.74 in the morning, its lowest price since July 2013.
Yesterday's total option volume in the name was more than 1.5 times its daily average for the last month. Overall puts outnumbered calls by 9.5 to 1.
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