Markets

How trader shows confidence in VF

VF has been one of the strongest names in the market, and one investor is confident it will stay that way.

optionMONSTER's tracking programs detected the sale of about 2,000 October 120 puts for $2.70 to $2.95 against open interest of 536 contracts. If VFC stays above $120 for the next three weeks, the contracts will expire worthless and the investor will keep the premium earned.

Shares are down 0.6 percent to $125.57 and have appreciated 17 percent in the last three months. The S&P 500 has dropped 11 percent over the same period.

The clothing stock, once known mostly for jeans, has been riding a wave of strong demand both overseas and for its North Face brand. Earnings beat forecasts on July 21, and analysts at firms including Merrill Lynch, Stifel Nicholaus, Cowen, and Credit Suisse have made bullish moves since the news.

Even if VFC falls back to $120, the investor will simply have to buy shares at that level . Including the credit earned, that translates into an effective entry point below $118. Selling puts is a common strategy when investors like a stock but don't want to expend capital getting long.

It will also benefit from the accelerating pace of time decay that occurs as expiration approaches. (See our Education section)

Overall option volume in VFC is triple the daily average so far today.

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

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

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