November 30, 2010 / 12:17 AM / 9 years ago

Barclays attracts unusual flurry of put trading

* Nearly all of Barclays March puts appear to be sold

* Most prints done on International Securities Exchange

* ISE does not comment on individual trading activity

By Doris Frankel

CHICAGO, Nov 29 (Reuters) - Unusual put activity on the U.S.-listed shares of British bank Barclays Plc (BARC.L) (BCS.N) on Monday grabbed a lot of attention among traders due to the massive amount of trading and the unusual order size.

In all, about 161,000 puts changed hands in Barclays, well above their average daily volume of 1,167 contracts versus only 3,050 calls, according to option analytics firm Trade Alert.

Nearly all of the action was concentrated in the March 2011 $17, $18, $19 and $20 puts, strike prices all above the current share value. On the New York Exchange, Barclays shares rose 1.22 percent to $16.51.

Traders said a lot of the activity was crossed on the International Securities Exchange and appeared to be mostly puts sold on hopes the bank’s shares will rise ahead of March expiration.

Deutsche Boerse’s (DB1Gn.DE) ISE, an electronic options platform, said it does not comment on individual trading activity.

“This put volume was very unusual and had a lot of observers thinking that some of the volume might have been a mistake from a firm executing a strategy to sell a number of in-the-money options strikes in Barclays,” said Henry Schwartz, president of options analytics firm Trade Alert in New York.

“The people I have talked to said there was no reason to bust the trades because they did not qualify as erroneous, based on the ISE definition of erroneous trades,” Schwartz added.

An equity put option grants the right to sell the stock at a fixed price any time up to expiration. Investors selling puts keep the premium received if shares rise sufficiently and the puts expire worthless by March expiration.

It is difficult to tell whether the majority of these options were bought or sold as the market was a little off, but it appears that about 70 percent of the puts traded were sold on the bid — which means this is a bullish bet, said Steve Place, a founder of investingwithoptions.com in Mobile, Alabama.

The price action in Barclays “can be viewed as a proxy to the European debt crisis, so the large trader may be betting that the worst may be over, at least in the intermediate term,” Place said.

Trade Alert data detected a very unusual combination of high put option volume this morning which was in small lot sizes in the March puts ranging from $17 to $20 strikes.

In total 150,000 contracts traded in the four strikes, all before noon EST comprised of 76,000 individual executions, Schwartz said.

“Usually large size orders are associated with institutional activity,” Schwartz said. “But in this case, you had what looked like institutional volume trading in the form of tiny orders normally associated with retail flow.”

“Our computers lit up like a proverbial Christmas tree” as the March puts traded when the shares were at $16.31 this morning, said Jon Najarian, a co-founder of the Chicago-based website optionMonster.com.

Reporting by Doris Frankel; Editing by Andrew Hay

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