Traders turned bullish on Procter & Gamble yesterday after reports that it is considering the sale of some cosmetics lines.
optionMONSTER's Heat Seeker system detected buying in the March 83, 83.50, and 84 strikes, with about 3,300 to 5,700 contracts trading in each strike. Volume was well above previous open interest in all three, indicating that these are new positions.
Long calls lock in the price where investors can buy a stock, which lets them position for a rally with limited capital. That can be safer than purchasing shares directly because only the cost of the options can be lost on a pullback. The calls can be sold anytime before they expire but will lose value if the stock falls. (See our Education section)
PG rose 2.11 percent to $83.56 yesterday after Bloomberg reported that the company "is exploring a sale or initial public offering of some of its beauty brands in a single deal, people with knowledge of the matter said." The consumer-products giant gapped down from above $89 when it issued weak quarterly results and lowered guidance on Jan. 27, blaming the strong dollar.
Total option volume in PG topped 31,000 yesterday, more than double its daily average for the last month. Overall calls outnumbered puts by 4 to 1.
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