Big Avon Options Bet (AVP)

Avon Products Inc. (NYSE: AVP) is a controversial stock in all aspects.  While some were hoping that buyout interest would remain and head higher, many are hoping that former CEO Andrea Jung (who was recently re-elected to the board) will ultimately get booted out of the company entirely.

Over the last year we have witnessed shares falling from over $30.00 to almost $16.00 before the recent recovery.  The problem is that the bad news has not ended and the turnaround has yet to even really get started.  So why is there such highly unusual options trading activity in this stock?

If you look out to the July options trading, which is now only about two months out, there is some speculative call options activity.  Either someone is under the impression that something good is about to happen on the M&A front or they are expecting business to pick up this summer for Avon.

We have seen more than 37,000 contracts trade in the JULY $22 CALLS and the open interest before today was listed as only 5,999 contracts.  As a reminder, this is worth some 3.7 million shares if you count this options activity on a fully leveraged basis.  Avon trades an average of 7.7 million shares or so each day.

Joe Kunkle of OptionsHawk.com wrote in options trader lingo, “Avon Products (AVP) with 34,900 calls trading, initial buyers on $0.85 offer and IV jumping as blocks of 10K and 24,700 come in at $1.15, opening buyers.  Calls trading with a block of 1.357M shares of stock.”

The move today is with Avon down 3% at $20.36 and its 52-week range is $16.09 to $30.63.  Shares closed at $21.57 and the stock traded as low as almost $19.50 on two days this week.

If there are any rumors out there it is not evident at all in the stock.  Still, it is always interesting when you see very unusual options trading on Fridays when the options are not just hedging transactions.

JON C. OGG