RAH – Ralcorp Holdings, Inc. – Shares of the manufacturer of a variety of private label food products edged more than 2.6% lower today to trade at $55.78 by 12:40 pm (ET). Yesterday the St. Louis, MO-based company agreed to purchase American Italian Pasta Co. for approximately $1.2 billion in cash in order to expand its product portfolio. The decline in the price of Ralcorp Holdings’ shares today did not deter some options investors from initiating a near-term bullish stance on the stock. It looks like optimistic traders sold 1,500 puts at the July $55 strike to pocket an average premium of $0.91 per contract. Put sellers keep the full premium received on the transaction as long as RAH’s shares exceed $55.00 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 $54.09 each in the event that the put contracts land in-the-money at expiration. The overall reading of options implied volatility on Ralcorp Holdings Inc. is soaring 32.1% higher this afternoon to 24.98% as of 12:45 pm (ET).
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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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