Put Options Skewing Diamond Foods (DMND)

Diamond Foods, Inc. (NASDAQ: DMND) is one troubled stock that may not be out of the woods, particularly if its walnut growing suppliers walk away.  The CEO and CFO firing after the walnut growers’ payments probe have seemed to have made it more of a possibility.  Then there is the DOJ inquiry, and that is before the company has to settle any class action suits and deal with other issues.

The options traders have decided that the puts are better than the calls, which would generally signal downside protection or downside bets.  On Monday there were only about 16,000 total call options traded.  The puts had more than 37,000 contracts trade.  This is just the March 2012 Put matrix:

• 15.00: 9,750 contracts traded versus open interest of 2,438 contracts
• 17.50: 3,921 contracts traded versus open interest of 6,188 contracts
• 19.00: 654 contracts traded versus open interest of 977 contracts
• 20.00: 6,904 contracts traded versus open interest of 2,302 contracts
• 21.00: 789 contracts traded versus open interest of 4,552 contracts
• 22.50: 1,210 contracts traded versus open interest of 4,498 contracts
• 24.00: 301 contracts traded versus open interest of 425 contracts
• 25.00: 3,807 contracts traded versus open interest of 9,746 contracts

The standout trade is that 9,750 of the MARCH 16, 2012 expirations.  That is $7.10 under the current price.

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