Huge Put Trade in Fannie Mae

Fannie Mae (NYSE: FNM) is receiving a humongous put trade, which just happened minutes ago. The Jan 2012 $1.00 put was sold 118,000 times, on the bid, for $0.40. There is effectively no open interest on the line so this is new positioning. This trade in a vacuum would signal a neutral to bullish tone, saying that the trader does not think that the Fannie shares will be wiped out. There was minimally large blocks of stock trade in the minutes after the trade, but not nearly totaling the 12 million that would be needed to make this a bound trade (not even 1 million shares traded, fyi).

I would tread carefully with this play, though it does have a very nice risk/reward. I never use the same reasoning/valuation methods for stocks that are tainted by the touch of the government. Unless you’re a swing trader, I would stay away from Fannie Mae.