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Why one trader is selling puts in Gildan

By: optionMONSTER
Posted: 5/25/2012 1:43:00 PM
Referenced Stocks: GIL

Gildan Activewear has pulled back after a big rally, but one trader apparently thinks that it's on solid ground.

optionMONSTER's tracking programs detected the sale of 2,300 July 22.50 puts for $0.55 against open interest of just 10 contracts. The activity took place in less than two minutes and accounted for all the activity in the company so far today.

GIL is down 0.4 percent to $24.92 in afternoon trading. It above touched above $29 earlier in the month, then fell along with the rest of the market and has recently been holding support at its 200-day moving average.

Selling puts obligates the investor to buy shares for $22.50 if they close below that level on expiration, but their entry price would be $21.95 including the initial credit. Traders often use this strategy when they like a name but don't want to spend capital up front to get long. (See our Education section)

GIL makes inexpensive clothing such as shirts, much of which is sold to other companies for silk screening.

Overall option volume in the stock is 19 times greater than average so far today.