Timken has bounced in the last week, but option activity remains
Our Depth Charge monitoring system detected the purchase of 3,000
August 42.50 puts for $1.73 and the sale of an equal number of
August 37.50 puts for $0.49. Volume was below open interest in the
37.50s, so there are two possible explanations for the transaction.
One is that an existing position in the lower-strike contracts was
closed and rolled up after the shares climbed. Alternatively, both
halves may have been opened. In that case, it would have been a
bearish put spread
with a cost of $1.24 and a maximum potential profit of more than
300 percent if the industrial stock closes at or below $37.50 on
expiration. (See our
TKR is up 1.7 percent to $44.75 in afternoon trading and has
appreciated almost 9 percent in the last five sessions. The
supplier of products used in machinery is scheduled release
earnings next Thursday, July 26, before the bell. The last release
in April beat expectations and guidance was strong.
Overall option volume in the name is quadruple the daily average so
far today, with puts outnumbering calls by more than 300 to 1.