Taking Profits In LXK And Watching Put Accumulations In KKD

We’re looking at some of our more recent positions and taking profits and
doing general housekeeping, as the conditions don’t merit sticking our necks
out. Therefore, we’re taking half
the Lexmark
(
LXK |
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PowerRating) spread off at these
levels. On July 23 we highlighted LXK in the following way: “With
LXK trading for $51, traders can buy the September 50 puts for $4.60 and sell a
like amount of September 40 puts for $1.30.
Their total risk in the position is defined on entry at that $3.30. A 10 x 10 Bear Put
Spread would set them back $3,300, but a close at $40 or lower in LXK means that
$3.30 investment would be worth $10, or $10,000 on that 10 x 10 bear put
spread.”

Today, with LXK trading for $45.55, the September 50 puts have moved up to
$6.50, while our short 40 puts are nearly unchanged at $1.50. Thus, the bear put
spread we wrote of establishing for $3.30 is now trading for $5, a gain of 51%.

Aside from that housecleaning, the heavy dollar-weighted call volume in EMC
(
EMC |
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PowerRating) is simply deep-in- the-money Put Spreads swapped between
dealers to get into an interest rate (short stock) play. However, the action for
the past several sessions in Krispy Kreme
(
KKD |
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Chart |
News |
PowerRating)
has been decidedly bearish. Lots of put accumulations, especially at the August
25 level. An even 4400 of those Aug 25 puts traded yesterday and today more folks are
buying deeper in-the-money puts, as shares remain very difficult to borrow,
thus, pushing investors looking for downside insurance or traders playing for a
continued slide of KKD shares into the puts.