STZ was up very hard on the InBev, Modelo Deal rallying 37%. ?But, I question whether the deal is 100% a go based on the option trading yesterday. ?Traders were jumping over themselves to buy puts in STZ. ?Check out the volume in March:
livevolX (r) www.livevol.com
STZ typically has a larger call to put ratio, one can see in the open interest. ?Yet, here we are on a day when volume was 20 times normal volume, puts were 1.5 times as active as calls. ?
livevolX (r) www.livevol.com
That is not an insignificant number, and points toward a lot of fear that the Justice Department might not sign off on the deal.?
The Trade:
The Skew absolutely blew up today in STZ. ?We think the floor on this stock is about 30 or so. ?One can easily put on 1 by 2 put spreads for a credit. ?With some work, one can actually leg into butterflies for even money. ?Especially with volume this high and bid-ask spreads as wide as they are.
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