PVH – Phillips-Van Heusen Corp. – The apparel company with a portfolio of brands that includes, among others, Calvin Klein and IZOD popped up on our ‘hot by options volume’ market scanner today after one strategist initiated a three-legged bearish transaction in the December contract. PVH’s shares are down 3.95% to arrive at $60.00 with 80 minutes remaining in the trading session. The pessimistic player appears to have partially financed a debit put spread by selling out-of-the-money calls. He sold 1,500 calls at the December $50 strike for a premium of $1.00 each, purchased the same number of puts at the December $60 strike at a premium of $3.50 apiece, and sold 1,500 puts at the lower December $50 strike for premium of $0.80 a-pop. Net premium paid to initiate the transaction amounts to $1.70 per contract. The investor is poised to profit should the price of the underlying shares fall 2.8% from the current price of $60.00 to breach the effective breakeven point to the downside at $58.30 by expiration day. Maximum potential profits of $8.30 per contract are available to the investor if shares plummet 16.7% lower to trade below $50.00 by December expiration. Phillips-Van Heusen Corp. reveals third-quarter earnings after the closing bell on November 18, 2010.
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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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