One investor is using options to manage a highly conservative trade in General Mills.
Our tracking systems detected the sale of about 2,600 April 40 calls for $1.12 and the purchase of roughly the same number of January 40 calls for $0.72. Volume was below open interest in the January strike but not the April options, which suggests that an existing short position was rolled from one contract to the other.
The investor probably owns shares in the slow-moving food maker, whose brands include Cheerios, Green Giant, and Progresso. Selling calls against the stock generates income, which reduces the downside risk of the overall position. The trader can also continue receiving its 3.4 percent dividend yield.
Yesterday's transaction paid a credit of $0.40. In return for that money, the investor agreed to sell the shares for $40 through early next year. (See the discussion of covered calls in our Education section.)
GIS rose 0.85 percent to $39.32 yesterday. More than 12,600 option contracts traded overall, compared with 3,600 in an average session.
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