EARN25

Avon Products, Inc. (AVP) Options Trader Aims For Higher Highs

At least one options trader thinks Avon Products, Inc. (AVP) will take out the $7 level within the next month

Oct 18, 2016 at 12:11 PM
facebook X logo linkedin


Avon Products, Inc. (NYSE:AVP) stock is getting a big boost today, thanks to some early options trades. According to Trade-Alert, one speculator bought to open at least three 2,500-contract blocks of November 7 calls just after 10 a.m. ET, anticipating the makeup stock will topple the out-of-the-money level by back-month expiration, at the close on Friday, Nov. 18. While the shares were lower at the time, they've been smoking-hot ever since.

At last check, AVP is up 6.2% at $6.58, and earlier tapped at annual high of $6.60. On a year-to-date basis, the stock has now advanced over 62%. As such, delta on the out-of-the-money call has risen to 0.42 from 0.29 at Monday's close, suggesting the chances of an in the money finish are now slightly better than 2-in-5.

Options traders haven't always been so keen on AVP calls. In fact, during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open nearly four puts for every call. The resultant put/call volume ratio of 3.88 ranks just 10 percentage points from an annual peak.

That said, not all of these put buyers are necessarily bearish. Especially given AVP's technical track record, it seems probable that some of these traders were actually shareholders scooping up puts to hedge against a surprise move lower.

Elsewhere, though, another group of traders has been more clearly bearish -- and, as such, could be feeling the heat amid Avon Products, Inc.'s (NYSE:AVP) bull gap. Specifically, short sellers may be scrambling to cover, considering 25 million shares are sold short -- which would take over a week to buy back, at the stock's average daily volume. Moreover, analysts may be reevaluating their generally downbeat perspective, with seven of nine maintaining a "hold" or a "strong sell" opinion.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

 

You Don’t Need 25 Alerts -- You Need ONE You Can Trust!

That’s the idea behind Trade of the Week, Schaeffer’s newest trade alert.

Every Monday morning before the opening bell, you’ll receive a single, expertly researched trade recommendation -- built from the same proprietary research we’ve been using for over four decades.

It’s not just a signal.

It’s a plan designed for traders who are tired of jumping from alert to alert without ever finding their edge.

No juggling alerts. No switching directions mid-week. Just one clear, expertly researched trade idea -- delivered before the market even opens.

👉 JOIN RIGHT NOW FOR JUST $1 TO GET THE NEXT TRADE!