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Somebody Doesn’t Like Sara Lee

Option trader profits when the consumer food stock falls


This put option investor may be the guy that doesn’t like Sara Lee (NYSE: SLE).

OptionMONSTER’s Depth Charge tracking program detected the purchase of 8,000 SLE April 15 Puts for $0.10 and the sale of an equal number of SLE April 17 Calls for $0.35. The trade resulted in a net credit of $0.25.

SLE rose 1.43% to $17 in morning trading. It ripped higher in December and January amid buyout speculation, but then fell after management said none of the offers were acceptable. The maker of products such as Jimmy Dean, Hillshire Farm, and Sunbeam now plans to pay a $3 special dividend and split into two separate firms.

For options trading investors, this trade may have been the work of a shareholder looking to hedge against a drop. Known as a collar, that would ensure the trader a minimum exit price of $15.25 and a maximum exit price of $17.25.

Alternately, it could be an outright bearish play that would profit if SLE falls below $15.25 and lose money over $17.25.

Similar activity occurred late last month, when investors sold calls. Total option volume in the name is the daily average so far in the session, according to the Depth Charge.

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