Monday's option traders expressed optimism toward
Travelers Companies Inc
), ahead of the company's early morning turn in the earnings
confessional. Throughout the course of the session, 3,373 calls
crossed the tape, compared to 908 puts. TRV's May 85 call was the
most sought after strike on the day, where 2,708 contracts traded,
mostly at the ask price. With open interest rising overnight, it
appears that a fresh batch of bullish positions was initiated.
The now in-the-money calls were picked up for a volume-weighted
average price (VWAP) of $1.29, making breakeven $86.29 (strike
price plus the VWAP). These calls have easily been pulled into
profitable territory today, thanks to Travelers' 2.38%
post-earnings pop. At last check, the
(INDEXDJX:.DJI) component was lingering near the $86.59 mark.
From a wider sentiment standpoint, option players have been piling
up on puts, and not calls, in recent months. The equity's 50-day
International Securities Exchange (ISE), Chicago Board Options
), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.00 ranks
just five percentage points from a 52-week peak, suggesting bearish
bets have been accumulated over bullish at a near annual-high clip
in recent months.
On the charts, TRV has put in a solid performance in 2013, with the
stock up roughly 21% year-to-date. This positive price action has
been highlighted by the equity's 20- and 32-day moving averages,
which helped usher Travelers to a record peak of $89 in today's
Given this technical tenacity, the withstanding trend toward puts
could be indicative of shareholders
using puts to protect profits
against a potential pullback. However, to the delight of investors,
Travelers is enjoying a solid day in the green, after the insurance
issue unveiled a
first-quarter earnings beat
, as well as boosted its dividend by 4 cents to 50 cents per share.
This article by Karee Venema was originally published on
Schaeffer's Investment Research
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