Bearish play in Range Resources

Range Resources is drawing a bearish three-way trade before its earnings report after today’s close.

A trader bought 2,790 May 90 puts for $1.86 and, at the same time, sold the same number of May 85 puts for $0.47 and May 95 calls for $1.39, according to optionMONSTER systems.

This bearish play is done for no cost, as the credits from the puts and higher-strike calls exactly offset the cost of the 90 puts. So the risk is that the trader is effectively short shares above $95. The trade could be a put-spread collar that is hedging long stock, but that would only be protective down to that $85 price level.

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