Supervalu has fallen to its lowest level since January, and now
one big investor is looking for a rebound.
optionMONSTER's tracking programs detected sale of 4,500 June 12.50
puts on the supermarket chain, most of which priced for $0.40. At
the same time, a matching number of June 15 calls was purchased for
about $0.14. Volume was more than five times open interest in both
strikes, and the transaction generated a credit of $0.26.
SVU rose 2.88 percent to $13.23 on Friday but is down 18 percent in
the last month. The shares have been plunging since April 20 when
management issued a weak full-year forecast and said improvement
will be a "long-term process."
Despite the drop, the debt-laden company has returned to a level
where its stock gapped higher early in the year. If it holds, it
would mark the fourth higher low since SVU traded below $10 in
November 2008. Some chart watchers may consider that evidence of a
Friday's option trade, known as a bullish combination, is a
relatively low-risk attempt to profit from a rebound in the stock.
The investor can only lose money if SVU falls below $12.50 by
expiration and stands to make unlimited profits if it climbs above
$15. Between the two prices, they simply keep the $0.26 credit.
The next scheduled event that could serve as a potential catalyst
for Supervalu is an appearance at the Citi Food & Drug Retail
Conference on May 25 at 9:30 a.m. ET.
The trade pushed total options volume in SVU to seven times greater
(Chart courtesy of tradeMONSTER)
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