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Options Trading News

June 27, 2012  Wed 9:49 AM CT

FDO: SEE CHART GET CHAIN FIND STRATEGIES
Shares of Family Dollar Stores are slipping this morning even as option traders looks for a floor under the stock ahead of the company's earnings call tomorrow.

FDO is down 2.99 percent to $68.41. The discount retailer hit an all time high of $74.73 on June 14 but has been slipping in the last two weeks.

More than 6,000 FDO options have traded already today, well above its daily average of 800 in the last month. Almost all of that volume is in the July 67.50 puts, according to optionMONSTER's systems.

Those puts were sold in institution-size blocks, with the two largest chunks of 1,000 and 1,999 going for $2.10 on a wide bid/ask spread. Open interest at the strike was just 752 contracts at the start of the session, so these are new positions.

The put sellers are betting that FDO will hold above the $67.50 strike price in coming weeks. These traders are also trying to take advantage of the implied volatility of those puts, which is 40 percent, while the 30-day historical volatility is 28 percent. The discrepancy results largely from the earnings announcement, which typically increases the volatility premium. (See our Education section)
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