Calls smooth ride in Constellation

Constellation Brands has been climbing steadily, and one investor using options to guide the move.

optionMONSTER’s tracking systems detected the purchase of 5,000 July 90 calls for $2.80 and the sale of 4,000 October 95 calls for an average premium of $2.475. Volume was below open interest in the July contracts, so it appears that a short position was rolled forward in time.

They probably own shares in the beverage company and had sold the 90s as part of a covered-call position. Buying them back today cost $410,000 but gives him or her the right to receive an additional $5 on 400,000 STZ shares–a potential return of $2 million. He or she also removed the upside limit on a 100,000 other shares.

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