Trader doesn't want Clorox to get away
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring system detected the purchase of 4,000 May 92.50 calls for $0.25 and the sale of an equal number of May 80 puts of $0.10. Volume exceeded open interest at both strikes, indicating that new positions were initiated.
The strategy cost just $0.15 to implement and ensures the investor a piece of the action if the stock surges above $92.50 by expiration. He or she may expect such a move after the company's earnings report on May 1.
CLX is off 0.27 percent to $88.45 in afternoon trading but is up 21 percent so far this year. It's been rallying along with other consumer-products companies as investors shift money back into equities following years of preferring bonds.
Today's trade has the advantage of costing little, preventing the investor from missing a big move before expiration. Because of the short puts, he or she is also on the hook to buy shares for $80 if they fall below that level by expiration. That probably wouldn't be a problem, as the trader already likes CLX. (See our Education section for more on how options can be used to manage trades.)
More than 8,500 contracts have traded in the name so far today, nearly 5 times the average amount.