Hedge in Cabelas before earnings


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Cabelas reports earnings today, and traders were hedging their bets early.

optionMONSTER's Depth Charge monitoring system detected the purchase of 3,950 November 60 puts for $2.19 and the sale of an equal number of November 65 calls for $1.45 yesterday. Volume was more than twice the previous open interest at each strike, indicating that new positions were initiated.

Known as a collar , the trade cost $0.74 and will protect against a drop below $59.26. The investor probably owns shares in the hunting-and-fishing retailer and wants to guard against a selloff. He or she is now on the hook to sell the stock for $65 if it rallies above that price. (See our Education section for other hedging techniques.)

CAB fell 1.13 percent to $62.39 yesterday. It more than doubled from January 2012 to May 2013 and has been drifting lower since. Earnings have remained strong and the stock is holding its 200-day moving average, which could make some investors think that the trend is still bullish.

Total option volume was 28 times greater than average in the session, according to the Depth Charge.

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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