With the Nasdaq near a 14-month high, and the VIX near a 14-month low, I have been building a basket of out-of-the-market puts on financially-distressed stocks drawn from Short Screen's screener1. Today's addition to this basket are the $6 strike, JUN 10 puts on United Airlines parent UAL Corporation (Nasdaq: UAUA), UALRK.X. I bought a few of these today at $0.40.
Those puts are now trading at $0.35 -- they dropped 12% last week a day before a report from Continental broke that moved the underlying stock higher1. UAUA was up ~10% today, but not enough to move my out-of-the-money puts again.
Virgin Media, another company in the put basket, priced a junk bond offering today. I wonder if some income-oriented investors are going to pick up long-dated puts on VMED now, with the intent of buying its junk bonds after the credit markets tighten and yields rise.
I mentioned this on Short Screen earlier, but I added a few out-of-the-money JUN 10 puts on TBSI to the basket today.
1Andy Swan has described options as the "'tells' of the underlying".