Bearish investors boosted put volume in Nordstrom (NYSE: JWN, Stock Forum) during the first half hour of trading yesterday without significant news from the fashion specialty retailer.
Looking at the Oct. 14-19 put spread, one investor bought the spread 5,000 times at $2.20 per spread with the stock trading at $18.50. The Oct. 14 puts, which were trading down two cents, were home to current open interest of 441, while the near-the-money Oct. 19 puts, which have dropped eight cents, were home to open interest of 2,881.
Normal daily options volume in JWN is approximately 10,000 contracts across all strikes versus the whopping 45,000 total contracts that traded in the first two hours of trading yesterday. The bulk of that volume, or about 40,000 contracts, crossed the tape in the Oct. 14 puts and Oct. 19 puts (and was split fairly equally between the two strikes).
Mixed jobless claims and consumer sentiment reports have sent retail stocks downhill in the last few months, and yesterday, the S&P Retail Index (RLX) was off about one point to 316.8. JWN shares have rallied steadily since reaching a 52-week low of $6.61 last November. Currently, the stock is up eight cents to $19.07 a share. This nearly 200% gain in eight months could have some investors looking for profit-taking opportunities.
Heavy put spread buying such as this does not mean investors should run out and sell their JWN holdings. At least one investor is participating in the options sell-off we’re seeing on a bet that JWN stock could expire lower than $16.80 (the higher strike price minus the premium paid) come October expiration.
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