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Pre-Earnings Bears Swarm Green Mountain Coffee Roasters

GMCR's front-month put volume swells ahead of earnings

by 5/2/2012 12:57 PM
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Bearish bettors have flocked toward Green Mountain Coffee Roasters (GMCR - 49.74) today, as roughly 35,000 puts have changed hands so far, more than quadrupling the equity's expected intraday volume. Most active in the front-month series is the in-the-money May 55 strike, where nearly 2,900 puts have been traded -- all of them at the ask price, pointing to buyer-driven volume. This option currently holds open interest of just 2,344 contracts, making it safe to say that new positions are being added here today.

Meanwhile, it appears that a block of 800 puts were sold at the May 50 strike, while an equal number of calls were simultaneously sold at the same strike -- thus implying the initiation of a short straddle. In this strategy, the trader is betting on GMCR to finish exactly at $50 by front-month expiration. Alternately, the trader could be selling premium to capitalize on an expected post-earnings volatility crush.

In terms of technical performance, GMCR has shed more than 22% of its value over the past 52 weeks, and has lagged the broader S&P 500 Index (SPX) by around 31% during the last 60 sessions. On the charts, the stock is trading beneath its 10-week and 20-week moving averages, which have acted as resistance since early March.

It should also be mentioned that the coffee king is scheduled to step into the earnings confessional after today's close, and has topped analysts' bottom-line estimates in three of the past four quarters. At last check, GMCR remains flat with Tuesday's finish of $49.74.


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