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Options Action: Fortune Brands Not So Lucky?

On Friday, activist investor William Ackman's Pershing Square disclosed its 11 percent stake in Fortune Brands and shares surged on the news.

But according to options trader Mike Khouw, the announcement may not be so fortunate afterall. While the stock climbed higher, people came into the options market in a bearish tenor and bought puts, he said. In turn, the options premium went up. People are now wondering if the stock is fully priced here and whether Ackman will be able to extract more from the company.

If you are long FO, Khouw thinks now might be the time to consider an overwrite strategy. He's looking at selling the Dec. 55 calls for $3.

**MIKE'S FO TRADE**
Sell Dec. 55 calls for $3

To learn more about this trade, watch the video!


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Trader disclosure: On Oct.11, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Seymour owns (AAPL), (GE), (GOOG), (INTC), (MON), (MSFT), (MOS), (POT); Pete Najarian owns (DD); Pete Najarian owns (GE); Pete Najarian owns (POT); Pete Najarian owns (BEXP) calls; Pete Najarian owns (BP) calls; Pete Najarian owns (BME) calls; Pete Najarian owns (ERTS) calls; Pete Najarian owns (GDXJ); Pete Najarian owns (BRCD); Pete Najarian owns (CNI); Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)
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