Unusual put spread in Green Mountain


Green Mountain Coffee Roasters is seeing an unusual short-term put strategy as the stock trades near nine-month highs today.

More than 16,000 GMCR options have changed hands already, led by a February put spread that expires at the end of this week. optionMONSTER systems show that 3,700 each of the Weekly 42 and 42.50 puts traded for $0.20 and $0.24 respectively. The volume was multiples of open interest at each strikes, so this is new positioning.

Given the trade data and price action, this appears to be a credit spread . That means that the trader takes in a credit of $0.04 which would be the profit if GMCR remains above $42.50 through the end of the week. The risk, however, is $0.96 if the stock falls below $42. Even as this strategy has a very high probability of success, it has been termed "picking up nickels in front of a steamroller" by some. (See our Education section)

GMCR trades at $45.16, up 1.73 percent. The coffee company ended the Feb. 6 session at $48.94, its highest close since last May. Shares traded as low as $17.11 in July. 

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