How one put buyer is hedging Cintas
David Russell | [email protected]
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.