Options Trading News

September 18, 2013  Wed 12:09 PM CT

Supermarkets have been in stealth-rally mode, and the bulls are shopping at Safeway today.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 10,000 January 32 calls for $1.75. Equal-sized blocks were sold at the same time in the January 27 puts for $0.65 and the January 37 calls for $0.40. Volume was more than quadruple the previous open interest at all three strikes.

The trade combines a bullish call spread with put selling to produce a highly leveraged position. It cost just $0.70 to open and will expand to $5--a profit of 614 percent--if the shares close at or above $37 on expiration. (See our Education section)

SWY is down fractionally to $30.95 in afternoon trading but is up 89 percent in the last year. That makes it the strongest member of the SPDR Consumer Staples Fund during that time, according to our researchLAB market scanner. Other grocers, such as Supervalu and Kroger, have also outperformed by a wide margin in the group, whose performance is shown on the graphic below.

There was a flurry of activity in SWY yesterday, with the company adopting a poison-pill provision to avert a hostile takeover by an unidentified bidder. It's now back around the same levels where it peaked in mid-2008. The next potential resistance area on its chart is around $37 or $38 from early 2007, roughly the objective of today's complex strategy.

Total option volume in SWY is more than 4 times greater than average so far today, according to the Heat Seeker.

(Graphic courtesy of researchLAB)
Share this article with your friends


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 »