One trader is positioning for a rebound in Mead Johnson Nutrition.
optionMONSTER's tracking systems detected the purchase of 2,000 August 105 calls for $5.80 and the sale of 2,000 August 90 puts for $2.95. Volume was well above the previous open interest in both strikes, showing that this is a new combination trade.
The strategy is bullish because a rally would boost the price of the long calls while decreasing the value of the puts that were sold . But the opposite will occur if the stock drops, and the trader will be on the hook to buy shares if they fall below $90 by expiration in mid-August. (See our Education section)
MJN rose 1.74 percent to $101.13 yesterday. The infant-formula manufacturer fell from the $105 level in March, pressured by the surging dollar, but has bounced from a support around $98 that has held since the beginning of the year.
Yesterday's combination trade made up practically all of the option volume in MJN, which was more than 13 times its daily average for the last month.
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