Call volume surged in Avon Products yesterday, but it doesn't
optionMONSTER's tracking systems detected the purchase of 9,800
January 2013 22 calls for $0.95. A large block of shares was sold
less than two minutes later, suggesting the use of a so-called
The strategy hedges the long position in the calls with the short
position in the stock, making the investor directionally neutral on
the cosmetics company. Instead of a move specifically higher or
lower, the trader is betting that option premiums will increase.
It makes sense because AVP is in the midst of a leadership
transition after management slashed guidance and authorities
started investigating the company in October. Last month it gapped
higher after announcing that long-time CEO Andrea Jung would be
The trader behind yesterday's option play probably thinks that the
market will price in a big announcement soon, which would mean
higher levels of
. He or she may be targeting the next earnings release, which will
probably occur early next month. By picking longer-dated contracts,
the trader is also more leveraged to volatility because of a
. (See our
AVP closed yesterday's session at $17.71, up 1.37 percent. Its
option volume was more than 4 times the average amount.
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