What's behind put action in Avon

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Avon Products has been languishing after a big drop, and one investor is still worried about further downside.

AVP optionMONSTER's Depth Charge tracking system detected the purchase of 9,100 January 28 puts for $0.75 and the sale of 9,100 December 28 puts for $0.10. Volume was below open interest in the December contracts, suggesting that an existing position was rolled from one month to the next.

The trade provides an additional month of protection at a net cost of $0.65. Making the move now lets the investor receive something for the puts already owned. Given that December expiration is less than two weeks away, those contracts will lose value at an accelerating pace in coming sessions.

AVP is off 0.1 percent to $29.22 in midday trading. It gapped lower after a bad earnings report on Oct. 28 and has been stuck around the $29 level since. The cosmetics company is struggling to maintain its sales and didn't seem to get much benefit from increased marketing campaigns in the last quarter.

The shares are now consolidating below their 200-day moving average, which some chart watchers may consider a prelude to further downside.

Total option volume in AVP is 5 times greater than average today, with puts accounting for 96 percent of the activity.

(Chart courtesy of tradeMONSTER)



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

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


This article appears in: Investing , Options

Referenced Stocks: AVP

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