Options Trading News

October 15, 2013  Tue 9:53 AM CT

A complex put spread tops today's option activity in Walgreen.

optionMONSTER systems show that a trader first sold 5,000 January 60 puts for $0.77 and then another block of 3,000 for $0.74 a few minutes later against previous open interest of 6,914. At the same times, he or she bought 5,000 April 52.50 puts for the ask prices of $2.42 and then $2.30 in volume that was 10 times the open interest at that strike.

This initially appeared to be a roll, but with the additional volume in the January contracts points to a diagonal spread. In that case, the trader is using the sale of the nearer-term further out-of-the-money puts to help offset the cost of purchasing the April options. It suggests that the trader sees a floor around $50 for the stock through the end of the year. (See our Education section)

WAG is down fractionally to $56.64 reversing earlier gains this morning. The drugstore chain was trading at the $50 level a month ago.

About 20,000 WAG options have traded this morning, almost double its daily average already.
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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.

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