Stock Option Investment Advice

What’s Up With Carpenter Technology Put Options?

Carpenter Technology’s (CRS) put option volume was significantly high on Friday of last week. Carpenter’s stock price was also down 6% on Friday.

Carpenter Technology manufactures and globally distributes specialty metals.


Carpenter’s earnings report is tomorrow 10/27/2009. Carpenter’s former Chairman and CEO, Anne L. Stevens, recently resigned and her role was split into two positions with Gregory Pratt to serve as the Chairman of the board. The search for a new CEO is currently underway.

Carpenter has some pretty big competition: Allegheny Technologies (ATI), Nucor Corporation (NUE) and United States Steel (X).

Carpenter’s stock has been very volatile over the last year, trading between $11 and $26. Carpenter’s stock price is off of its 52-week high and well off of its two-year high in the $70’s.

CRS Chart

Carpenter’s November 20 and 22.50 put options were highly traded on Friday. The 22.50 put option was in-the-money and the 20 put option was out-of-the-money. There was nothing of interest related to Carpenter’s call option‘s on Friday.

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The sentiment for Carpenter looks bearish with the high put option volume and a recent CEO/Chairman resignation.

There are several ways to take a bearish position for Carpenter. An investor could simple short the stock. Option investors could purchase put options, but this is the riskiest approach and if the bearish sentiment is wrong, then option investors could realize a significant loss.

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A covered put is another stock options strategy to consider. This strategy involves shorting the stock and selling a put option. A covered put for CRS is available for November with a potential return of 4%. The put option of interest would be the November 22.5 with ticker symbol CRSWX. To enter the covered put, an investor would sell one put option for every 100 shares of SRS that is shorted.

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Another bearish stock options strategy to consider would be the bull-put credit spread. A bear-call credit spread is currently available for CRS with a potential return of 3.1%. The call options to invest for the position would be to sell the November 25 call option and purchase the November 30 call option. A more risky bear-call credit spread is also available with a much larger potential return of 11%. This position would entail shorting a November 22.5 call option and purchasing a November 30 call option.

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PowerOptions’ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.

[tags] specialty metals, Anne L. Stevens, Gregory Pratt, out-of-the-money, ATI, Allegheny Techs. Inc., CRS, Carpenter Tech. Corp., NUE, Nucor Corp., X, U.S. Steel Group [/tags]

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