PetSmart top called before earnings


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PetSmart reports earnings after the bell today, but one big investor is selling this morning.

PETM optionMONSTER's tracking systems detected the sale of 2,000 December 35 calls for $3.40 against open interest of just 123 contracts. The transaction pushed total options volume in the specialty retailer to 9 times greater than average.

PETM is up 0.85 percent to $37.99 in morning trading. While the stock is up 28 percent in the last three months, it's been dropping quickly since it hit an all-time high of $39.54 on Nov. 11.

The company issued bullish guidance the last time it released earnings on Aug. 19 and has a track record of making big moves in conjunction with financial results. Last week an investor purchased a December 35/40 strangle, betting that PETM would gap higher or lower on the news.

Today's activity was probably the work of a shareholder who thinks that upside will be limited through December expiration. Selling calls let him or her generate extra premium, giving them an effective exit price of $38.40. (See our Education section for more on how investors can write calls to generate income and manage existing portfolio positions.)

(Chart courtesy of tradeMONSTER)

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This article appears in: Investing , Options

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