Rare Put-Selling Opportunities in Large-Cap Stocks (KMB, WAG, EL)

By Lawrence G. McMillan

This year, there have been three occasions where seemingly stable, large-cap stocks suddenly saw their puts expand tremendously in terms of implied volatility.  We took advantage of the first two – Kimberly-Clark (KMB) and Walgreen (WAG) – in The Option Strategist Newsletter and now another has arisen: Estee Lauder (EL).  Earnings are out of the way, and there really isn’t anything else that might account for the heavy skew in the puts of EL.  For example, the at-the-money June 70 puts are trading with an implied volatility of 24%, but the June 60's are trading at 38%, and the June 55's are 47%.  I understand that out-of-the-money puts generally trade at higher implieds than at-the-moneys, but this is astonishing.

For naked  put-selling ideas and actual trading recommendations on a daily basis, subscribe to The Daily Strategist.