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Bearish options in play on Coca-Cola, DuPont as shares move lower

Bearish options in play on Coca-Cola, DuPont as shares move lowerThe Coca-Cola Company (NYSE:KO) – Shares in Coca-Cola Co. declined to a near six-month low of $36.54 on Tuesday, joining the broad market decline on global growth concerns and weak earnings. Options traders anticipating further declines in the price of the beverage maker’s shares snapped up December expiry puts straight out of the gate this morning. Traders buying more than 1,800 of the Dec. $35 strike put at an average premium of $0.46 apiece today stand ready to profit at expiration in the event that KO shares slide 5.5% from the current level to breach the average breakeven price of $34.54. Strategists purchasing the $35 calls appear to be adding to bearish positions established on Monday. Traders yesterday paid an average premium of $0.32 apiece for around 400 of the Dec. $35 strike call; premium required to purchase these contracts has increased roughly 40% overnight.

E I Du Pont De Nemours And Co (NYSE:DD) – Weaker-than-expected third-quarter earnings released by chemical maker, DuPont, ahead of the opening bell this morning saw shares in the name trade down as much as 9.3% on Tuesday to $45.11, the lowest level since the start of 2012. Traders positioning for the price of the underlying to extend losses through the end of the year established bearish positions in the November and December expiry options today. Options players picked up more than 700 of the Nov. $43 strike put in early-morning trade for an average premium of $0.40 apiece, and purchased around 600 of the Nov. $44 strike put at an average premium of $0.49 each. Buyers of the lower Nov. $43 strike put profit at expiration in the event that DuPont’s shares slide another 5.5% to breach the average breakeven price of $42.60. Like-minded bears looked to the Dec. $43 strike put, buying up 1,000 contracts for an average premium of $0.79 apiece. Traders long the put options stand ready to profit by December expiration in the event that DD shares drop more than 6% to settle below a fresh 52-week low of $42.21. Some bearish put buyers who acted ahead of DuPont’s earnings release are seeing big gains in their positions overnight. Time and sales data from Monday indicates some traders purchased at least 1,800 puts at the Nov. $49 strike for an average premium of $1.09 each. These contracts, now deep in-the-money, are changing hands at a premium of $4.15 per contract, a near four-fold increase since Monday.

ARM Holdings plc (NASDAQ:ARMH) – A decidedly down day for most stocks spared investors in ARM Holdings PLC, with shares in the chip designer up better than 9% at $30.68 this morning. Shares in ARMH increased sharply after the company posted better-than-expected third-quarter revenue and said it expects fourth quarter revenue commensurate with expectations. Front-month put option activity on the stock appears to be the work of traders locking in gains given the more than 9.5% rally in the shares today and the impressive 40% move to the upside since mid-July. The most active options on ARM Holdings in the first half of the trading day were the Nov. $30 strike puts, with upwards of 2,100 contracts in play versus open interest of just 17 contracts. Most of the volume appears to have been purchased for an average premium of $1.05 apiece, thus providing profits or downside protection given a more than 5.5% dip in the price of the underlying to $28.95 by expiration next month.

Caitlin Duffy
Equity Options Analyst

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