AVP – Avon Products, Inc. – Shares of the global manufacturer of beauty and related products fell 3.35% to $26.85 by 11:50 am (ET), inspiring bearish options traders to take action on the stock. Investors anticipating continued erosion in the price of the underlying shares through July expiration scooped up out-of-the-money put options. Pessimists purchased roughly 700 puts at the July $26 strike for an average premium of $0.45 apiece. Investors long the July $26 strike puts profit if Avon Products’ shares decline another 4.85% to breach the effective breakeven price of $25.55 by July expiration. Buying interest spread to the lower July $25 strike where bearish players picked up some 2,300 puts for an average premium of $0.30 a-pop. Investors long the lower strike puts make money if the cosmetics maker’s shares fall 8.00% from the current price of $26.85 and slip beneath the average breakeven point to the downside at $24.70 ahead of expiration day next month. The jump in demand for options on AVP helped boost the stock’s overall reading of options implied volatility 13.3% to 38.62% by 12:00 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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