How investor is hedging Generac


An investor appears to be protecting gains in Generac as it pulls back from all-time highs reached at the end of last month.

optionMONSTER's Depth Charge system shows that 2,966 October 41 puts were purchased for $1.45 to $1.57 late yesterday afternoon. This is clearly new activity, as open interest in the strike was a mere 13 contracts before the trades appeared.

These puts lock in the price where the stock can be sold through mid-October no matter how far it might fall. They were likely bought to hedge a long position established earlier rather than make an outright bearish bet, given that the stock has doubled in the last year. (See our Education section)

GNRC fell 2.74 percent yesterday to close at its session low $41.10 after sliding all afternoon. The generator manufacturer gapped to a lifetime peak of $44.30 after reporting strong quarterly results on July 30 but pulled back a few days later, and shares have been trading in a tight range since. They hit a 52-week low of $20.25 two sessions after last Labor Day.

Total option volume in the name yesterday was more than 12 times its daily average for the last month. Only 201 of those contracts were calls.

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