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)



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.

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This article appears in: Investing , Options

Referenced Stocks: PETM

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