Walgreen draws complex spread
Chris McKhann | [email protected]
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.