Someone’s cleaning up as consumer staples defy the market selloff.
Just look at Procter & Gamble (PG), whose brands include Tide laundry detergent, Bounty paper towels and Dawn dish-washing liquid. It’s one of the best-performing members of the Dow Jones Industrial Average and S&P 500 in the last month, supported by a strong earnings report on October 19.
It appears that a large options trader has profited from the rally and is now looking for the move to continue through the spring. Here’s a breakdown of yesterday’s big trade:
- A block of 20,000 January 77.50 calls was sold for $12.50.
- A matching number of April 95 calls was bought for $1.95.
Volume was below open interest in the Januarys but not the Aprils, which suggests a long position was rolled higher in price and forward in time. Making the adjustment lets the trader recover $10.55 of their capital. He or she also has an additional three months to profit from further upside.
It works because calls fix the price where a security can be purchased. Their cheap upfront cost helps investors manage risk and generate leverage. (See our Knowledge Center.)
PG rose 0.16 percent to $88.24 yesterday. Price hikes for Pampers and strong demand for Olay beauty products drove its last profit beat. Some traders might worry about a near-term pullback because it’s near the top of its longer-term range. Rolling the calls out in time could protect against a near-term drop because it also reduced their delta.
Overall options volume was triple the monthly volume on Monday, with calls outnumbering puts by a bullish 7-to-1 ratio.
