by Houghton and Atkeson 05/15/08
Options trading activity in Heinz (HNZ) exploded this morning, generating 13 times the usual volume. With the stock at $48.50, an investor bought 14,000 of the HNZ Dec 50 Puts. (HNZXJ). The HNZ June 50 Puts (HNZRJ) also traded nearly 1,400 times.
Paying roughly $4.10 for the December puts, the stock would have to trade below $45.90 for these puts to be in-the-money at expiration.
The company, which is scheduled to report its fourth-quarter earnings on May 29, has been buying back stock and should be benefiting from a weak dollar like it did last quarter. It gave conservative guidance on its previous update, and now one has to question whether or not it was sandbagging.
The stock is up roughly 15% since its 18-month closing low of $41.90 on Feb. 6. Shares are now bumping up to the $49 resistance. Is it ready to break out? This put buyer looks to be anticipating and betting on some other price action.
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