Brunswick draws bearish earnings play

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Speedboat maker Brunswick has been racing higher, but one investor is worried that a bad earnings report could sink the shares.


optionMONSTER's Depth Charge tracking program detected the purchase of about 2,000 May 26 puts for $1.10 and the sale of an equal number of June 29 calls for $0.65, resulting in a net cost of $0.45.

The position will make money if BC drops in the near term but obligates the trader to sell shares if it goes above $29 over a longer period. He or she probably owns shares and is willing to unload them in the event of a rally.

The strategy resembles a collar but uses different expiration months. The sale of longer-dated calls offset the cost of the puts and tailored the trade to guard against a weak set of numbers this morning. (See our Education section for more on how options can be used to build customized hedging positions.)

BC rose 3.3 percent to $26.90 yesterday and has almost doubled since early October. The last three earnings reports have beaten estimates.

Overall option volume was 10 times greater than average in yesterday's session.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.



This article appears in: Investing , Options

Referenced Stocks: BC

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