Year-ago level key to Campbell trade

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An investor sold the upside in Campbell Soup yesterday, targeting a key level from last summer.

optionMONSTER's tracking programs detected volume of 6,400 August 35 calls for $0.46 against open interest of just 363 contracts. The premium was much closer to the bid price, indicating the trade was a sale.

That $35 level is roughly the same place where the food stock peaked in late June and early July before dropping to a multi-year low in August. The investor is now obligated to sell the stock if it returns to that price but, including the credit earned, the exit price would be $35.46. He or she probably owns the equity and is using the options as part of a covered call strategy.

CPB, which fell 0.06 percent to $33.66 yesterday, has been an extremely slow-moving stock. It's up just 5 percent since the August lows, compared with a 17 percent gain for the S&P 500 in the same period.

Yesterday's call seller may have purchased the stock at the lows of last summer and is now using the contracts to establish a selling date one year later to reduce tax liabilities. It also lets the investor get paid for the passage of time . (See our Education section)

Overall option volume was 9 times greater than average in the session.



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: CPB

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