WAG – Walgreen Company – Disappointing third-quarter earnings from the largest U.S. drugstore chain sent shares of the underlying stock down as much as 6.70% to an intraday low of $28.12. Walgreen Co. posted an 11% decline in third-quarter net income to $0.47 a share from $0.53 a share in the same period last year. WAG was cut to ‘hold’ from ‘buy’ at Lazard Capital this morning. The sharp decline in shares of the drugstore chain spurred some options traders to throw in the towel. Bears expecting WAG’s shares to trade below $30.00 through July expiration shed 1,900 calls at the July $30 strike for a premium of $0.30 apiece. Investors selling the calls may be ditching previously established bull call positions to garner dwindling premium, or may be initiating fresh short call positions because they expect to walk away with the $0.30 premium per contract received on the sale. WAG’s reading of options implied volatility is down 7.3% to 29.99% following earnings.
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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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