Energizer draws protective strategy
Chris McKhann | [email protected]
optionMONSTER's Depth Charge tracking program shows a put ratio spread dominating the activity. The trader bought 1,500 May 95 puts for $2.45 and sold 3,000 May 90 puts for the $1.05 bid price. The volume was more than 10 times open interest at both strikes, so this was a new ratio spread.
He or she paid $0.35, which is the risk if shares remain above $95, plus the margin requirement on the extra short puts. The maximum gain comes if shares are down at $90 at the expiration. Gains erode below that level and potentially become losses under $85 because they will be assigned shares at $90 on a drop below that level.
The strategy is often used by investors trying to protect a long position, who'd be willing to buy more on a pullback. See our Education Section for other hedging techniques.
ENR rose 0.87 percent to $98.99 in morning trading. If it holds that price it would be a new closing high since January 2008. Shares have been trending higher since August after bouncing off long term support around $65.
Puts outnumber calls by more 450 to 1 so far today, according to Depth Charge.