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January 31, 2013  Thu 12:22 PM CT

AVP: SEE CHART GET CHAIN FIND STRATEGIES
The bulls have been making money in Avon Products this year, and one big investor is looking for the uptrend to continue.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 20,000 July 17 calls for $1.38 and the sale of an equal number of March 17 calls for $0.64. Volume was below open interest in the March contracts, indicating that an existing position was rolled forward in time.

The trader now has an additional three months to profit from upside in the beaten-down cosmetics company. He or she paid an incremental $0.74 to make the adjustment. (See our Education section)

AVP is up 1.44 percent to $16.97 in afternoon trading and has gained 18 percent so far this year. It bled lower for years amid leadership problems and missteps in emerging markets before finally holding support at a 13-year low in December.

The Heat Seeker also detected upside activity in the name back on Dec. 19 in the January 16 calls, which generated some nice leverage as the shares climbed in subsequent weeks. Then on Jan. 17 our scanners found more buying in the April 19 calls.

Total option volume is twice the daily average so far today, with calls outnumbering puts by 70 to 1.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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