Strangle Sold on Dean Foods (DF)

Shares of Dean Foods Co. (DF) are trading higher on the session after the company released preliminary Q3 results for its WhiteWave-Alpro segment that exceeded the Street’s estimates.

In August, Dean had revealed it would spin off WhiteWave, its fast-growing unit that sells Horizon Organic dairy products and Silk soymilk. The IPO is expected to price in the range of $14-16 on 20 million shares.

Shares of DF are up by 12.23% today, trading at $16.88.

One options trader is taking the opportunity to sell premium here. A short while ago, the December $11/14 strangle was sold 7,500 times, on the bid, for $3.20. Given the respective on open interest on each strike, 235 and 812, this is clearly fresh positioning. The trade has pushed overall options volume to 8.5x normal volume.

UPDATE: As this report was being written, 5k more Dec12 $11/14 strangles were sold, on the bid, for $3.25. 

The whole short strangle was paired with 1,250,000 shares of DF common, that traded between $16.70-16.85.

30-day implied volatility remains muted today, at 54%. 10-day realized vol is registering 23.32%.

Dean Foods Company is a food and beverage company. It operates through two segments: Fresh Dairy Direct-Morningstar and WhiteWave-Alpro. 

About Michael Zerinskas

Originally from Chicago, Michael J. Zerinskas began his career as an intern for a small high-frequency trading firm based at the CME; he then moved on to become Chief Options Strategist at Benzinga.com. Michael is now Unusual Activity Editor at The Options Insider, specializing in VIX, volatility, and flagging unusual activity.