Bulls take shot at Avon Products


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Avon Products has been struggling for more than a month, but the bulls are giving it another try.

optionMONSTER's Heat Seeker monitoring program detected the purchase of more than 30,000 April 18 calls against open interest of 3,457 contracts. Premiums ranged from $1.10 to $1.30, but most of the volume crossed in a single large block for $1.20.

These long calls lock in the price where the cosmetics stock can be bought, letting investors profit from a rally without ever owning the shares. That can help manage risk in a weak name like AVP. The cheap cost of the options can also result in significant leverage relative to the underlying equity. (See our Education section)

AVP is down 3.98 percent to $17.11 in afternoon trading. It gapped lower in October on a poor earnings report and tried to hold its ground as traders bought calls in hope of a rebound. Today's decline results from news it will stop using a key piece of internal software, take a charge of up to $125 million and cut 650 jobs.

Total option volume is 10 times greater than average in the name so far today, with calls outnumbering puts by more than 10 to 1. 

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

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This article appears in: Investing , Options

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