Tiffany Options (TIF): Unusual Trading Activity

| May 23, 2012 | 0 Comments

TIF OptionsOptions on high end jewelry store Tiffany (TIF) are experiencing unusual activity this morning.

Tiffany options are usually very low.  This is simply because it’s a name that options traders don’t pay a lot of attention to.

However, with earnings due out before the bell tomorrow morning, the options are seeing some wild action.

More specifically, the June $62.50 put options.  A few bold traders came in today and sold 3,700 of these bad boys.  That’s more than twice the normal volume on this strike.

The puts were sold for an average price of $4.10 a piece.

It’s a highly bullish trade to say the least.

Tiffany shares are trading at $60.95 as I write. But these guys believe TIF will be trading over $62.50 per share come June expiration.  If that happens, they’ll keep the entire premium as profit.

It would be a superb 6.5% gain… in just one month.

I think this trade has a good chance of success.  In the midst of all this market carnage, high end retailers seem to be fairing pretty well.

As you know, Tiffany is an international jeweler and specialty retailer.

They design and sell fine jewelry in addition to fine china, fashion accessories, timepieces, fragrances, and gift items through more than 240 retail stores in the United States and abroad.

The jeweler also offers its trademarked merchandise on its website and through its online catalog.

But still, why are option traders so bullish on Tiffany’s ahead of earnings?

One reason is that several analysts are saying the high end consumer is still intact.  This bodes well for Tiffany as these individuals are their primary customers.

In addition, we can’t forget the company’s trademark little blue box commands a price premium in this competitive industry. It’s an important competitive advantage that should help Tiffany continue growing even if the economy slows.

And, as a significant buyer of diamond inventory, Tiffany has strong control of its supply chain.  This way TIF can control its inventory.  If sales increase, Tiffany can increase supply to keep up.

In the same case, if demand drops, Tiffany is still in control of its own inventory.  Meaning they will not be under or over supplied.

Last but not least, Tiffany is underpenetrated in China.  This represents a large growth opportunity for years to come.

So, with all of these positives Tiffany seems to have going for them, the idea of selling puts here makes a lot of sense.

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.

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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.