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Downside play in O'Reilly Automotive

Chris McKhann (chris.mckhann@optionmonster.com)

Heavy option trading in O'Reilly Automotive today is looking at potential downside.

optionMONSTER systems show that more than 80,000 ORLY options have already changed hands this morning, compared to a daily average of 1,400 in the last month. A three-way combination tops that volume.

A trader bought 14,200 February 95 calls for the ask price of $0.65 against open interest of more than 15,000. At the same time, he or she sold 17,500 May 100 calls for $1.30 and bought 17,500 May 80 puts for the ask price of $1.93. The volume at those two strikes was above open interest, so those were new opening positions.

It appears that the trader is rolling a short-call position to a higher strike in May while adding to the number of puts. This is likely done against long stock as a covered call converted to a collar . (See our Education section)

Shares of ORLY are up 1.08 percent to $89.66. The auto-parts retailer bounced off support at $80 in late October and was up against resistance at $95 in the first half of December.

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