Help on RDN (puts, credit, investment, stocks)

[darrell2525]

I been watching RDN for a possible entry. It has retraced 50%.

What does this mean below?

Thursday Options Recap - Seeking Alpha

"Radian (RDN) loses 19 cents to $2.69 and a 1250-lot of Jan 2 puts traded on the stock for 75 cents when the market was 65 to 75 cents. 1765 traded and today’s flow probably adds to positions from yesterday, when open interest in the contract increased by 4,747 to 7,500 and now the largest position in the Philadelphia-based credit insurance company. Implied volatility is up 3.5 percent to 95, as shares tick lower for a fourth day this week. RDN is down almost 13 percent since Friday. Earnings slated for Feb 23."

[howard555]

Originally Posted by darrell2525

a 1250-lot of Jan 2 puts traded on the stock.
1765 traded and today’s flow probably adds to positions from yesterday, when open interest in the contract increased by 4,747 to 7,500 and now the largest position in the Philadelphia-based credit insurance company.

Some large traders are buying alot of $2.00 puts expecting very bad news. If they paid 75 cents their breakeven is $1.25
OR they are selling the puts as a bullish trade, because they expect the news to keep the stock above $1.25 which gives them a profit on their $2.00 puts. If the stock stays above $2.00 they keep the entire 75 cents per contract.

The problem is knowing whether the puts were bought or sold.
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Options Monster founders do tell us on CNBC.
They have a subscriber base for a fee. They have ways to know when options are bought or sold, and it matters which way.
Every day they tell us about unusual option volume in a couple specific stocks.
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Someone on RDN could have shorted the stock and sold the $2.00 puts as covered puts.

So, the three scenarios appear to be:
1. short puts (sold)
2. long puts (bought)
3. covered puts (sold)

[howard555]

And those puts were January 2013, so they do have 12 months for their investment to pay off.