Procter & Gamble Options (PG): Unusual Trading Activity

| June 20, 2012 | 0 Comments

PG OptionsOptions in consumer products manufacturer Proctor & Gamble (PG) are experiencing a large amount of trading this morning.

Today could be the big pivot point in the market.  The Fed is set to announce its monetary policy decision later today. 

Will the Fed indicate further quantitative easing to stimulate the stock market?  Or will Mr. Bernanke disappoint Wall Street and send the market plummeting once again?

It’s anyone’s guess!

Now, back to this unusual option trading today ahead of the meeting results.

Proctor and Gamble is showing serious signs of weakness today.  PG gapped down almost 2% at the open this morning to $60.20 a share.

And option traders seem to be jumping on this in a big way.  Multiple traders came in seconds after the opening bell and purchased over 9,000 contracts of the PG June (weekly) $60 strike put options at a price of $0.25 a piece.

Spending a hefty $225,000, these option traders are thinking PG is heading lower over the next three days.

And by purchasing these put options without an offsetting trade, traders have unlimited upside potential.  If they’re right, they stand to make a serious amount of money.

Though, the question remains, what’s going on with this usually strong consumer discretionary name?

As most of you know, Procter & Gamble has become the world’s largest consumer product manufacturer.  It has a massive lineup of famous brands including Tide laundry detergent, Charmin toilet paper, Pantene shampoo, and Cover Girl cosmetics, just to name a few.

So, why so much negativity?

To start, the company came out this morning and shot itself in the foot.  That’s right, PG came out and revised their upcoming earnings guidance downward. 

According to analysts, PG has been putting too much emphasis on sales and profit margins in the emerging markets.  And as a result, they have not been concentrating their efforts domestically.

Obviously over the last few months this has hurt the company’s sales substantially.

Now what Proctor and Gamble is going to be forced to contend with is decreased margins.  And that leads to price wars with competitive companies.

And while this will probably be good for the average consumer, it’s not going to bode well for PG.

This happens to still be a good company in my book that I would own.  However, for the short term, option traders obviously disagree!

What do you think?

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.