Market News

December 29, 2016  Thu 7:50 AM CT

Consumer staples have lagged as the market hit new highs in recent months, and traders are positioning for potential declines in some key names.

Stocks in the sector are often considered relatively safe because they generally experience less volatility and offer high dividends. But they tend to fall out of favor in bull markets as investors seek riskier assets and rising interest rates in other asset classes make their yields less attractive. Yesterday our scanners found downside trades in the SPDR Consumer Staples Fund, food company Mondelez, and hygiene-products giant Procter & Gamble:

  • XLP: 5,600 February 50 puts were bought for $0.35-$0.36 against open interest of 220 contracts.
  • MDLZ: 3,300 March 37 puts were purchased for $0.56 against open interest of 2,213 contracts.
  • PG: 2,800 Weekly 81 puts expiring on Jan. 13 were bought for $0.18 to $0.20 against open interest of 249 contracts.

Long puts lock in the price where a stock can be sold, so they make money if shares decline. Investors use them to hedge long positions or to speculate on a drop. These contracts are safer than shorting a stock directly, as the options limit the amount of cash that can be lost if shares rally. (See our Education section)

XLP fell 0.61 percent to $51.73 yesterday and is down 2 percent in the last three months. MDLZ is up 4 percent in the last three months but slipped 0.29 percent yesterday to close at $44.72. PG has declined 4 percent in the last three months and was down 0.63 percent to $84.07 yesterday.

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