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Estee Lauder sees call selling at highs

Chris McKhann (chris.mckhann@optionmonster.com)

Shares of Estee Lauder have pushed back near all-time highs, but option traders apparently see limited upside in the near future.

EL rose 6.24 percent yesterday to finish at $117.98. This is the cosmetic company's second-highest close after its lifetime closing high of $118.92 on Nov. 3.

More than 10,000 EL options traded yesterday compared with a daily average of 2,100, and the call/put ratio was 5 to 1. The most active contracts were the December 120 calls, where 7,408 traded against an open interest of 1,483. The largest block of 6,920 was sold for the bid price of $2.

The options were not tied to any underlying stock trades that we identified, so this could be naked call selling in a bet that EL won't break above current resistance levels in coming weeks. It is also possible that the contracts were sold against long stock as a covered call --the most popular option strategy--which would be bullish up to that strike price but still not seeing much upside above it. (See our Education section)

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