Clorox has been fighting a downtrend, and investors remain
nervous toward the stock.
optionMONSTER's Depth Charge monitoring system detected the
purchase of 1,000 August 85 puts for $2.10 and the sale of 2,000
August 82.50 puts yesterday. Volume was more than 5 times open
interest at both strikes.
The position will earn a maximum profit of $2.50 if CLX closes at
$82.50 on expiration. It cost nothing to open because they earned
extra income by selling more downside contracts. That leverages a
move to a specific level, while obligating them to buy shares below
He or she probably owns the stock and is using the trade as a
hedge. It has the double benefit of protecting against a decline of
$2.50 while also programming a buy order at the lower price. Given
that the consumer-products name bounced around $82.50 last week,
they're probably willing to buy more if it gets that cheap.
The strategy is known as a ratio spread because 2 times more puts
were sold as the number purchased.
CLX rose 0.97 percent to $85.13 yesterday but has been trending
lower since touching an all-time high of $90.10 in April. It's now
back near the top of that descending channel and is sitting at its
50-day moving average, which could make some chart watchers fear
another push to the downside. The ratio spread is a common way to
protect against such a move. (See our
section for other hedging strategies.)
Overall option volume was more than quadruple the daily average in
the name. Puts accounted for a bearish 83 percent of the total,
according to the Depth Charge.
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