Dow component DuPont (NYSE: DD) said today that it will eliminate another 2,000 jobs as part of its ongoing plan to cut costs. Previously, the blue chip slashed 2,500 employees and 4,000 contractor positions from its payroll back in December.
The company will take a second-quarter pre-tax restructuring charge of $340 million to $390 million as a result of the job cuts, though DuPont said it will save $225 million by the end of 2010.
The news pressured DD to a loss of 3% within the first hour of today's trading. The stock's pullback could potentially find a floor near its 20-day moving average; in collaboration with its 10-day counterpart, this trendline has guided the shares higher since early March.
Despite the security's respectable year-to-date gain of 15%, option players are bearishly aligned toward DD. During the past 10 days, traders on the Chicago Board Options Exchange (CBOE) and the International Securities Exchange (ISE) have bought to open 1.22 puts for every call. This ratio ranks higher than 88% of other such readings taken during the previous year, indicating that DD's puts are in greater demand than usual.
However, some traders are taking advantage of today's dip to initiate new call positions on the stock. DD's June 24 and June 25 calls have both traded volume in excess of open interest, indicating that open interest at these in-the-money strikes will likely rise overnight.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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