Green Mountain Coffee Roaster (GMCR) hit a morning low of $17.80, but is now up 54 cents to $18.80. Shares are up $1, or 5.6 percent, off session lows heading into earnings, due out after the closing bell today. Options on the stock remain actively traded as well. 30,000 calls and 28,000 puts traded on the stock so far. The top trades are part of a spread in the Weeklys expiring 8/3, in which the investor apparently bought the 20 – 24 call spread for 95 cents, 2500X (paid $1.17 for the 20s and sold 24s at 22 cents). The spread pays $3.05 if shares are trading north of $24 by the end of the week, which represents a 27.8 percent over the next two and a half days. While such a move might seem like a stretch, it’s not out of the realm of reality because the average daily post-earnings move in GMCR over the past four quarters is 29.2 percent! Shares were nearly cut in half on 5/3 when the company last reported earnings. 30-day ATM vols are up 3 percent and elevated at 132. Weekly 19 straddle trades at 23 percent of spot. Hold on to your hats!
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.