Bulls are thirsty for upside in Ambev

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Ambev has pulled back following a steady uptrend since 2009, and the bulls are looking for the gains to continue.

optionMONSTER's tracking programs detected the purchase of 5,000 September 42 calls in the Latin American beverage company for $0.40. An equal number of September 35 puts were sold at the same time for $0.40, resulting in a net cost of about zero.

Owning calls locks in the price investors pay to buy stock, while selling puts obligates them to buy shares if they drop to the strike price. Combining the two is very similar to holding shares because they can lose money to the downside but also stand to make money in the event of a rally.

The main difference is that entire position will become worthless if ABV remains between $35 and $42 on expiration. One major advantage of the strategy is that it allows the equivalent of 500,000 shares can be controlled for virtually no initial outlay.

ABV fell 0.45 percent to $38.02 on Friday. The stock has been building support around $36 for the last three months, and is now holding above its 50-day moving average. That could make some traders think it's getting ready for another push to the upside.

Overall option volume in the name was 5 times greater than average in the session.

(A version of this post appeared on InsideOptions Pro on Friday.)



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: ABV

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