Beauty and the Beast -- Avon Products (AVP)
by Houghton and Atkeson 01/07/09
Options activity in Avon Products (AVP) is running about 24-times usual levels today.
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With the stock slightly above $24, option investors are buying AVP Feb 20 Puts (AVPND) and AVP Feb 17.50 Puts (AVPNW) collectively 28,000 times. Is it possible the next month will be that ugly for this beauty company?
Earnings are scheduled to be reported on Feb. 2, well within the Feb. 20 expiration date. Other than the regularly -scheduled earnings report, there appears to be little other expected news flow during the duration of this options cycle.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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