Put seller bets on end to Avon's slide

By David Russell,

Shutterstock photo

Avon Products has fallen off the table in the last month, but one investor apparently thinks that the stock has found a floor.

optionMONSTER's tracking systems detected the sale of about 17,000 August 20 puts against open interest of just 221 contracts. Premiums declined from $0.35 to $0.30 as the trades crossed, which reflects the heavy selling action.

The trader will get to keep the premiums if AVP stays above $20 for the next two weeks, with the contracts losing their value at an accelerating pace as expiration approaches. Yesterday's action followed put selling at the August 24 strike less than a week ago.

Investors often sell puts when they believe that a stock has limited downside but don't necessarily wish to spend cash getting long. (See our Education section)

The cosmetics icon ended yesterday's session up 4.19 percent at $21.63, down from its trading range around $28 in June and July. Earnings missed estimates slightly at the end of last month, but management predicted big gains in profitability in the second half amid surging demand in Mexico and Brazil.

Overall option volume in AVP was 5 times greater than average in the session.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: AVP

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