Options Trading News

February 19, 2013  Tue 4:14 AM CT

Flowers Foods has soared nearly 40 percent in the last three months, and some traders apparently believe that its shares may have gone too far too fast.

optionMONSTER's Depth Charge system detected heavy buying in the March 25 puts, which saw 10,686 contracts trade as premiums doubled from $0.25 to $0.50 on Friday. These are clearly new purchases, as the strike's open interest was a mere 119 contracts before the session began.

These puts, which lock in the price where traders can sell shares no matter how far they might fall, weren't tied to any stock trades identified by our systems on Friday. The options could have been bought to protect a long position established earlier or to make an outright bearish bet that FLO will fall below the $25 strike price by expiration in mid-March. (See our Education section)

FLO finished Friday down 1.18 percent to $27.68. The baked-goods producer gapped up from the $20 level on Nov. 16 amid speculation that it might buy Hostess Brands, which is scheduled to begin auctioning off parts of its business at the end of this month. Flowers climbed to an all-time high of $29.04 on Feb. 7 after reporting strong fourth-quarter earnings and revenues.

Friday's put buying pushed total option volume in the name to 13,369 contracts, 27 times its daily average in the last month. Only 499 calls traded in the session.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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