Put volume surges on Leggett & Platt

Today’s tickers: LEG, AA, CAT, C, TIF & EYE LEG – Leggett & Platt Inc. – Our market scanners have picked up on sizable put activity in manufacturer, Leggett & Platt, where shares are marginally lower at $14.31. The activity involves around 20,000 puts at the February 12.5 strike, which is a little above the existing 52-week low at $11.79. We can’t tell from time and sales as to whether the investors bought or sold today’s volume – but we do know that no investors held an open position ahead of today at this strike. The options volume compares to current open interest across this stock of 30,477 contracts and so sticks out like a sore thumb. We suspect that the puts were sold and that the transaction also involves either a new or current position in the underlying shares. An investor could be short the stock and the sale of puts would give them reason to buy back to close the trade should shares reach the strike price. AA – Alcoa Inc. – An arrangement between New York Power Authority and Alcoa resulting in $600 million deal in which Alcoa will build a new power plant in exchange for rights to sell electricity to the state didn’t seem to do much for its shares – lower by 7% to $10.04. Perhaps that’s due to investors bracing themselves for a poor set of post-hours earnings today. Investors rolled 10.0 strike put protection from the January to February contract, while some investors sought the sanctity of protection as low as the 7.5 strike expiring Friday. We note that February puts at the 7.5 strike were actively sold today, while call options reflected a better outlook where rights to buy at the February 15 strike were largely bought today. Ahead of earnings, option implied volatility jumped 175 to 102% today CAT – Caterpillar Inc. – Shares in Caterpillar seem to be shaking out those less optimistic about the potential from the stimulus package and have dropped 4% to $41.50 today. Option implied volatility is a little higher at 61% while one favored way of playing activity in Caterpillar today seems to be the use of strangles implying range bound traffic ahead of February’s expiration. The February 35 puts were sold in conjunction with 45 strike calls expiring at the same time for a net credit of 2.75. That implies that the investor sees shares remaining within the $10…