HRB – H&R Block, Inc. – Shares of the provider of tax, retail banking, accounting and business consulting services and products rose 1.3% during the first half of the trading session to touch an intraday high of $14.24. However, one seemingly pessimistic player opted to purchase a chunk of put options today despite the improvement in the price of the underlying shares. It looks like the investor purchased roughly 4,000 puts at the January 2011 $11 strike for an average premium of $0.49 per contract. The put buyer, if it’s the case that the transaction represents an outright bearish bet that HRB shares are set to decline, makes money if the firm’s shares plummet by the start of 2011. The bearish trader profits if H&R Block’s shares collapse 26.2% lower to trade below the effective breakeven price of $10.51 by expiration day. We note that HRB’s shares have not come close to breaching $11.00 at any point in recent history. Perhaps the investor is less bearish than the transaction appears to be at first glance. While the put purchase does not appear to be tied to stock, the trader may already be long shares of the underlying. This type of scenario would suggest the investor is merely picking up cheap downside protection today rather than bracing for an HRB-Armageddon.
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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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