FAST – Fastenal Co. – Shares of the seller of industrial and construction supplies are down slightly by 0.15% in early afternoon trading to stand at $51.93 by 1:15 pm ET. Earlier in the session, Fastenal’s shares increased as much as 2.6% to secure an intraday high of $53.34. The stock appeared on our ‘hot by options volume’ market scanner around midday after one investor picked up a chunk of put options in the January 2011 contract. Put buying in this case may be the work of an outright bearish investor expecting shares to continue lower, or could represent hedging by an options trader who is seeking downside protection on a long position in FAST shares. The strategist purchased 4,500 puts at the January 2011 $50 strike for an average premium of $3.00 apiece. If the trader is buying the puts outright, he starts to make money if Fastenal’s shares fall 9.5% from the current price of $51.93 to breach the effective breakeven point to the downside at $47.00 by January expiration. FAST’s shares traded below $47.00 as recently as September 1, 2010. The company is slated to report third-quarter earnings ahead of the opening bell on October 12, 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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