Nordstrom might have lost more than 3% in Monday’s washout — however that cost action pushed, instead of prevented — a minimum of one alternatives trader to make an extremely bullish bet on the seller’s stock.
As of Monday’s close, Nordstrom had actually lost 13% in the recently of trading. This trader seems wagering that the bottom remains in, which the stock might leap as much as 34% by August expiration.
“We saw a big put sale early in the day on 2.4 times the average daily options volume, but that put sale is really more of a bullish bet; somebody taking advantage of the fact that people are expressing a great deal of distress, willing to get long on that stock at a lower level,” Michael Khouw, primary financial investment officer at Optimize Advisors, stated Monday on CNBC’s “Fast Money.”
That put sale was just half the story, however, as it appears like this trader utilized the premium they gathered because trade to fund a much more bullish call spread purchase.
“We saw somebody buying 3,000 of the August 37/42.5 call spreads, and so that’s also expressing a bullish outlook going into earnings, trying to take advantage of today’s weakness and elevations in implied volatility to position themselves for a potential rebound,” stated Khouw.
That trade breaks even at a stock cost of $37.57, or almost 19% greater than where the stock ended Monday’s session, and sees optimal revenues at $42.50, or 34% greater.
Nordstrom was up 4.75% in Tuesday’s session.