WAG – Walgreen Co. – The largest drugstore chain in the U.S. enticed bullish options strategists to the arena today, despite the 1.6% decline in the value of its shares to $30.35 as of 12:22 pm (ET), after the firm said it will no longer participate in new prescription-drug plans awarded to CVS Caremark Corp.’s pharmacy-benefit manager. Investors touting the view that Walgreen’s shares are not likely to decline much further ahead of July expiration sold 8,400 puts short at the July $29 strike to take in an average premium of $0.72 per contract today. Put sellers keep the full premium received on the transaction as long as Walgreen’s share price exceeds $29.00 through July expiration. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $28.28 each in the event that the puts land in-the-money at expiration.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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