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Bears refuse to loosen grip on Avon Products

Posted
8/2/2012 12:20:00 PM
By: optionMONSTER
Referenced Stocks:AVP

Avon Products has been struggling, and the bears are hungry for more downside.

optionMONSTER's Depth Charge monitoring system detected the purchase of 4,500 October 16 puts for $1.95 and the sale of an equal number of August 16 puts for $1.30. Volume was below open interest in the August contracts but not the October options, which suggests that an existing position was rolled from one contract to the other.

AVP is down 3.33 percent to $14.79 in midday trading and has lost more than one-quarter of its value in the three months. Quarterly results from the cosmetics company have been consistently poor since late 2011, and now its new CEO is grappling with overseas bribery charges.

The stock is trying to hold its lowest level since March 2009. If support breaks, some traders may expect the selling pressure to accelerate.

That is apparently the hope of today's put buyer, who is using in-the-money contracts. Those will let them track declines in the stock price closely and are used as substitutes for short-selling a stock. (See our Education section)

Overall option volume is twice the daily average so far in the session, according to Depth Charge. Puts outnumber calls by more than 20 to 1.