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Option Brief: Avon Products, Inc. (NYSE:AVP) is having a terrible day in the wake of this morning's earnings report. At last check, the stock was down 23.9% at $17.06. Against this backdrop, AVP has landed on the short-sale restricted list, causing put volume to soar to 11 times the average intraday rate. In fact, put volume is on pace to break a one-day record in AVP's options pits. However, it's calls that have the edge in the numbers race, with around 21,000 contracts having crossed the tape so far, compared to around 20,000 puts.
The vast majority of the day's call volume has centered at the December 23 strike. More than 13,200 contracts have traded here -- including a large block of 12,383. Nearly all of these positions have crossed on the ask side, and volume is outstripping open interest. What's more, despite a post-earnings plunge in AVP's 30-day, at-the-money implied volatility (IV), IV at the December 23 strike is up 13.9 percentage points amid this increased demand. Putting all the pieces together, it appears that new long positions are being initiated.
The options market isn't giving the call much of a chance for an in-the-money finish, as delta for the option is docked at 0.043, or 4.3%. Should the stock fail to fill in today's bearish gap and then some by the close on Dec. 20, though, the maximum loss is limited to the initial premium paid.
As noted, Avon Products, Inc. (NYSE:AVP) reported third-quarter earnings today that fell well short of analysts' expectations. Additionally, the company revealed that the bribery fine levied against it by the Securities and Exchange Commission (SEC) could be more costly than initially expected.