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Time is money for Smithfield trade

David Russell (david.russell@optionmonster.com)

One investor wants to squeeze a few pennies from Smithfield Foods, insuring the meat processor against a big drop.

optionMONSTER's monitoring programs detected the sale of some 3,600 May 22 puts for $0.20. Volume was more than triple open interest at the strike, indicating that new positions are being initiated.

Writing puts obligates traders to buy shares if they drop to a certain level, in this case $22. Should they remain above that price, the contracts will expire worthless and the $0.20 will be kept as profit. The strategy is often used when investors want to make money on a stock without expending cash and would be willing to buy at lower prices. (See our Education section)

SFD is up 0.55 percent to $25.37 this morning and 17 percent so far this year. Much of that move occurred on March 7, when earnings and revenue beat expectations thanks to packaged-meat sales.

Total option volume is almost triple the daily average so far in the session.

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