Avon Products has been weak for years, and the bears are moving in for the kill.
optionMONSTER's Depth Charge monitoring program detected the purchase of 36,300 October 4 puts for $0.85 and the sale of an equal number of October 5 puts for $1.60. Volume was below open interest at the higher strike, which indicates an existing position was rolled down the 4s.
Long puts make money when shares fall because they lock in the price where traders can sell stock. Their cheap cost helps manage risk and can generate significant leverage if a drop occurs. January 4 contracts cited yesterday, for instance, doubled in value today. (See our Education section)
Today's downside roll let the investor collect $0.75 and keeps him or exposed to further downside.
AVP is down 15.12 percent to $3.48 in afternoon trading and is down to its lowest levels since 1991. The ailing cosmetics firm has lost more than half its value this year amid broad sales declines and weakness in Latin American currencies. There have also been reports it's seeking a dilutive cash infusion to help it make debt payments.
Total option volume is 13 times greater than average in the session, with puts outnumbering calls by a bearish 23-to-1 ratio.
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