Option bears took a shine to United Parcel Service, Inc.
(NYSE:UPS) yesterday, buying puts to gamble on a short-term drop -- or perhaps a sympathy swoon -- for the stock. By the close, the package delivery concern had seen roughly 12,000 puts cross the tape, representing nearly three times UPS' average daily put volume.
Digging deeper, the weekly 3/22 85-strike put was most active, with more than 3,300 contracts exchanged. More than two-thirds of the puts crossed at the ask price, and open interest surged overnight, underscoring our theory of newly bought bearish bets.
More specifically, the puts traded at a volume-weighted average price (VWAP) of $0.42, meaning the buyers will begin to profit if UPS breaches the $84.58 level (strike price minus VWAP) by the end of the week, when the options expire. Risk, meanwhile, is limited to the initial premium paid for the puts.
However, yesterday's affinity for short-term puts -- which could've been indirect bets on a FedEx
(NYSE:FDX) earnings miss -- has become par for the course for UPS. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.99 stands just 4 percentage points from a 52-week peak, implying that near-term traders have rarely been more put-heavy during the past year.
On the charts, UPS has, in fact, dipped in sympathy with FDX, shedding 0.6% right out of the gate. From a longer-term perspective, the security has more than doubled since March 2009, touching a new eight-year high just yesterday.
This article by Andrea Kramer was originally published on Schaeffer's Investment Research.
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