Medtronic keeps making higher lows, and one big investor apparently believes that it's on solid ground.
optionMONSTER's tracking programs yesterday detected the sale of 4,800 Weekly 75.50 puts expiring on May 8 for $0.86. Open interest stood at just one contract before the trade appeared, which indicates it is a new position.
Put selling generates income and creates an obligation to buy shares if they fall below a certain level. Traders use the strategy when they like a stock but don't necessarily want to buy shares right away. It reflects a belief that there's little downside and, even if the stock does fall, their effective entry would be $74.64 because of the premium already received. (See our Education section)
MDT declined 0.55 percent to $77.99 yesterday but is up 8 percent so far this year. That not only exceeds the S&P 500's performance in the first quarter but also surpasses the broader health-care sector's 6 percent appreciation.
The medical-device maker reported better-than-expected earnings and revenue last month. It's also integrating its purchase of Covidien and launching new products.
Total option volume was almost triple average amounts in the session. Similar short-put trades also appeared in January and February .
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