Yum! Brands (NYSE:YUM) is looking to shed two of its less-iconic brands (Long John Silver’s and A&W) but a long-term investor seems to be adding to his or her own bearish position by scooping up LEAP ratio put spreads. The January 2013 40 and 45 puts were active on Monday and it was the second time since late January we have noticed unusually large volume at these strikes.
Yesterday, as the stock was moving modestly higher to an eventual close of $50.30, an investor apparently sold 3,600 of the January 2013 40 puts, as they traded on the bid price of $3.00 apiece. At the same time, a block of 2,000 of the January 45 puts traded on the ask price of $5.00 each, suggesting they were initiated on the buy side. This spread likely traded with stock, but probably only to aid in its execution.
What is especially interesting about this trade is not even the long-term nature of the play or the 1.8 ratio at which it traded, but the fact that the same strikes saw similar action on January 27. On this day, it looks as though 8,000 of the 40 puts sold for $3.70 each while 5,000 of the 45 puts were bought for $5.90 each. If it is the same investor, they may just be adding to this position with a similar trade fewer than three weeks later. (more…)
Either someone’s a huge fan of Meximelts and Personal Pan Pizzas or they simply expect some intermediate-term upside in the shares of Yum! Brands (NYSE:YUM). On Monday, an options investor was active in this name, trading a bullish risk reversal (also known as a synthetic long stock). This options strategy is an alternative to buying the stock outright; it has a similar risk/reward profile but requires less capital up front to put on the trade.
Yum! Brands (NYSE: YUM), the parent company of KFC, A&W restaurants, Pizza Hut, Long John Silver’s and Taco Bell reported strong earnings last night. The fast food conglomerate reported earnings-per-share growth of 23%. Worldwide profits leaped 13% with 37% growth coming from China. The stock responded positively, rallying to $43.18, up 3.6% on the day. Even though this may seem like a reason to buy the stock for the long term, for some traders it’s actually a signal to do just the opposite.
The S&P 500 started trading last Friday at the same level at which it closed on Monday of the same week. The Dow and NASDAQ were also flat on the week.
