Where the Bulls Want to Clean Up Today: Options Recap

Where the Bulls Want to Clean Up Today: Options Recap

A household consumer-products company has been running all year, and one big options trader wants to clean up.

Check out the unusual activity in Colgate-Palmolive (CL) about an hour into the session:

  • 20,030 August 67.50 calls were bought for $2.95.
  • 20,030 May 65 calls were sold at exactly the same second for $2.90.
  • Volume was below open interest in the 65s, which indicates the investor rolled a bullish long position higher in price and forward in time.

Calls tend to appreciate in value when a stock moves higher because they fix the price it can be purchased. It looks like today’s investor already had a profit from owning the 65s, so he or she sold them.

Colgate-Palmolive (CL) on OptionStation Pro. Notice the lower delta and gamma in the 67.50s, which reduces their directional exposure.

They then rolled their capital into the 67.50s, gaining an additional three months to profit from a potential rally. They also reduced their delta and gamma, which shields them from a short-term pullback. See our Knowledge Center for more.

CL rose 0.1 percent to $65.76 and is up 10 percent so far this year. While the company’s best known for products like Colgate toothpaste and Palmolive soap, Wall Street’s more excited about its Hill’s pet food division recently. That caused investors to look past weakness in some of its legacy brands the last time it reported earnings.

Overall option volume is about quadruple the average in the last month so far today, with calls outnumbering puts by more than 70-to-1.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.