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August 6, 2013  Tue 3:16 AM CT

AAP: SEE CHART GET CHAIN FIND STRATEGIES
Advance Auto Parts is drawing downside option activity ahead of its earnings report on Thursday.

More than 2,300 August 80 puts were bought for $1.10 to $1.25 yesterday, according to optionMONSTER's Depth Charge tracking system. The volume was well above the strike's previous open interest of 1,450 contracts, indicating new positioning.

These puts lock in the sale price for the stock no matter how far it might fall, allowing traders to hedge a long position or make an outright bearish bet. But the contracts will expire worthless if AAP remains above $80 through mid-August.

AAP was down fractionally yesterday to close at $83.41. In recent days it has been trading at the upper end of a tight range in place since mid-June.  

The auto-parts retailer is scheduled to report second-quarter results on Thursday before the market opens.

Yesterday's put buying made up the bulk of AAP's option volume in the session. Overall puts outnumbered calls by more than 25 to 1.
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