Walgreen faces big downside play

optionMONSTER

A large bearish position led yesterday's option activity in Walgreen.

A block of 7,100 of the May 60 puts was bought for the ask of $0.25 and at the same time the same size block of the 73 calls was sold for their bid price of $0.21. This is clearly new activity, as the previous open interest was below 100 contracts at each strike.

The combination of long calls and short puts cost $0.04, which is the amount at risk with the stock between $60 and $73, though the trader would be on the hook to buy shares if they fall below the lower end of that spread. This could either be an outright bearish bet or a collar that is protecting a long position against a pullback. (See our Education section)

WAG was up fractionally at $67.42 yesterday, the best close since its 52-week highs reached in early March. The drugstore chain's shares were below $56 a month before that.

The company will present at the Barclays 2014 Retail & Consumer Discretionary Conference on Wednesday. The next quarterly results are scheduled for June 24.


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