Yum Brands (P/C Chart, news, volatility) Feb puts saw increasing activity ahead of earnings due out tomorrow after the closing bell. Most of the volume was due to one spread trade, where the strategist sold 2,500 Feb 30 puts for $2.175 and bought 4,500 Feb 27.5 puts for $1.075. Today’s open interest data suggest a new position (ratio backspread) was created and, if so, the strategist collected a credit, which they keep in YUM stays above the higher strike. However, the backspread also generates downside profits if YUM shares see a significant post-earnings slide and suffer big losses before the Feb options expiration.
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.