GCI – Gannet Co., Inc. – The international news and information company popped up on our ‘hot by options volume’ market scanner this morning after one pessimistic options player purchased a plain-vanilla debit put spread in the August contract. The USA Today publisher’s shares are currently down 2.7% to stand at $15.90 as of 11:35 am (ET). The bearish spread involved the purchase of 1,250 now in-the-money puts at the August $16 strike for a premium of $1.20 each, marked against the sale of the same number of puts at the lower August $14 strike for a premium of $0.50 apiece. The net cost of the transaction amounts to $0.70 per contract. Thus, the investor responsible for the put play is prepared to make money as long as Gannet’s shares slip beneath the effective breakeven price of $15.30 ahead of expiration day. The trader walks away with maximum potential profits of $1.30 per contract if shares of the underlying stock plunge 11.95% from the current price to breach the $14.00-level by August 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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