Options Trading News

May 16, 2013  Thu 2:45 AM CT

Cintas is grinding higher, and one investor is using options apparently to hedge against a drop.

optionMONSTER's Depth Charge monitoring program detected the purchase of 2,200 June 45 puts, most of which priced for $0.90. Volume was more than 12 times the previous open interest at the strike, indicating that these are new positions.

The contracts lock in the price where shares can be sold in the company, which supplies employee uniforms to institutions such as hotels and restaurants. The options can generate significant leverage to the downside, compensating for any losses that might be suffered if the stock drops. (See our Education section for more on how options can be used to manage risk.)

CTAS rose 0.97 percent to $45.58 yesterday and is up 11 percent so far this year. The slow-moving stock has been gradually building support above the same $45 level where it peaked in 2005. Yesterday's put buyers may be concerned about a major selloff if that support level fails.

Overall option volume in the name was 8 times greater than average in the session, according to the Depth Charge. Puts accounted for almost four-fifths of the total.
Share this article with your friends



The fastest money in the market
View full report »

Premium Services

Education & Strategy

The art of trading

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.

View more education articles »