Put Players Pummel Sherwin-Williams Company (SHW)

03/22/2010 10:12 am EST

Focus: OPTIONS

Elizabeth Harrow

Financial Analyst, Schaeffer's Investment Research, Inc.

Put options on Sherwin-Williams Company (SHW) are enjoying a surge in popularity today, with volume rising to nearly 18 times the expected level. Approximately 12,000 of these bearishly oriented options have traded so far, compared to SHW's predicted daily put volume of just 671 contracts.

SHW price chartMost of today's speculation is centered around SHW's April 65 put, where 10,623 contracts have traded. About 92% of these contracts have crossed the tape at the ask price, implying a bias toward buying activity, and implied volatility on this option is up 2.4% at last check. With just 5,245 contracts in residence at the April 65 put, it seems that the majority of today's volume consists of newly opened positions.

No news in particular seems to have sparked today's spike in put volume, and SHW's next earnings report isn't scheduled to hit the Street until April 22—several days after April-dated options are set to expire.

However, with SHW soaring to a new annual high earlier this week, it's possible that investors are looking to protect their paper profits by purchasing protective puts. By snapping up April 65 puts, traders are purchasing the right to sell shares of SHW at no less than $65 apiece.

Of course, it's also possible that this is simply bearish speculation. With 8.3% of the equity's float sold short, it's safe to say that not everyone is on SHW's bullish bandwagon.

SHW is holding steady on the charts at last check, off just fractions of a point amid a down day for the broader equities market. For the better part of a year, the stock's consistent uptrend has been highlighted by support from ten-week, 20-week, and 32-week moving averages.

By Elizabeth Harrow of Schaeffer’s Trading Floor Blog

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