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Hillshire pullback draws buyers

By: optionMONSTER
Posted: 4/15/2014 5:35:00 AM
Referenced Stocks: HSH

Hillshire Farms has pulled back to a key level, and the bulls are stepping in.

optionMONSTER's tracking systems detected the purchase of 2,000 October 38 calls for $1.35 and the sale of an equal number of October 32 puts for $0.96. Volume exceeded the previous open interest in each strike, indicating that this is a new combination spread.

It cost $0.39 to open the position, which will behave similarly to owning shares in the maker of Jimmy Dean sausages and Ball Park franks. The investor is spending much less money up front than buying stock directly but will be on the hook to buy shares if they fall below $32 by expiration in mid-October. (See our Education section for more on long calls and short puts .)

HSH rose 0.71 percent to $35.22 yesterday. It gapped higher on a strong earnings report in late January, traded as high as $38 the next month, and has been skidding lower more recently. The shares are now back to old highs from November and their 100-day moving average, which could make some chart watchers think that they're due for a bounce.

The next earnings report is scheduled for May 6.

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