Schaeffer's Trading Floor Blog

Skeptics Have Avon Products, Inc. (AVP) in Their Sights

Technical laggard AVP has experienced high levels of put buying lately

by 1/31/2014 2:11 PM
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Avon Products, Inc. (NYSE:AVP) has edged 0.5% higher today to trade at $15.00, recovering after earlier touching a fresh annual low of $14.62. Nevertheless, in 2014 alone, shares of the beauty products concern have already lost nearly 13%.

As such, AVP has been targeted by option bears of late. At the Chicago Board Options Exchange (CBOE), 15,063 puts have been bought to open on the stock versus 1,253 calls during the last five sessions, resulting in a put/call volume ratio of 12.02. Including data from the International Securities Exchange (ISE) and NASDAQ OMX PHLX (PHLX) -- and expanding the window from five days to 10 -- yields a comparably top-heavy put/call volume ratio of 6.24. More significantly, this ratio sits higher than 91% of similar readings from the last year, suggesting traders have bought puts (to open) over calls at a near-annual-high pace.

Right now, peak put open for the current options cycle interest resides at AVP's at-the-money February 15 strike, which is home to 13,163 contracts. The vast majority of these positions were bought to open -- particularly on Jan. 24 -- as option bears expect the stock to retreat south of $15 (and continue moving lower) by the closing bell on Friday, Feb. 21, when the front-month puts expire. This time frame includes the release of Avon's fourth-quarter earnings report.

Meanwhile, in today's action, puts are being traded at a seven-fold mark-up to the intraday average. So far, roughly 26,000 puts are on the tape, compared to fewer than 1,600 calls.

The majority of the action has transpired at AVP's out-of-the-money February 12 and 13 puts, where a respective 11,051 and 8,793 contracts have traded. In both cases, volume outstrips open interest, indicating freshly minted positions. However, the majority of the activity at the 12 strike occurred at the bid price -- suggesting the contracts were sold (to open) -- while the majority at the 13 strike transpired at the ask, suggesting the contracts were purchased (to open).

Finally, in case you missed it, my colleague Milissa Hudepohl noted just a few days ago that an overseas Avon Products, Inc. (NYSE:AVP) subsidiary is in dire financial straits. Specifically, it's been reported that Avon France may enter receivership.

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