How bull is playing Constellation

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Someone apparently believes that Constellation Brands will keep going and going.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 3,000 April 70 calls for $4.10. He or she also sold equal-sized blocks in the April 65 puts for $2.55 and the April 80 calls for $1.05. Volume was more than 5 times open interest at all three strikes, indicating that new positions were initiated.

It cost $0.50 to open this trade, which will expand to $10 if the alcoholic-beverage stock closes at or above $80 on expiration. But he or she must buy shares for $65 if they fall below that level by expiration in mid-April, so the trade carries downside risk.

STZ was up 0.13 percent to $69.23 yesterday and has risen 95 percent so far this year as investors have cheered its acquisition of import rights for Corona beer.

Yesterday's strategy combines short puts with a vertical call spread to provide the investor with extremely cheap upside exposure. They also apparently see little downside risk. (See our Education section)

Total option volume was 9 times greater than average in the session, according to the Heat Seeker.



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: STZ

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