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Nordstrom may have lost more than 3% in Monday’s wash – but this price action encouraged, rather than deterred – at least one options trader to make a very bullish bet on the retailer’s shares.
As of Monday’s close, Nordstrom had lost 13% in the last week of trading. This trader seems to be betting that the bottom is reached and that the stock could jump 34% by the expiration of August.
“We saw a big sell sell early in the day on 2.4 times the average daily options volume, but this sell sell is really more of a bullish bet; someone taking advantage of the fact that people are expressing a lot of distress, ready to take a long position in this stock at a lower level, “Michael Khouw, chief investment officer at Optimize Advisors, said Monday on CNBC’s” Fast Money. “
This sell off sale was only half the story though, as it looks like this trader used the premium he collected in this trade to fund an even more bullish buy spread buy.
“We saw someone buy 3,000 from the 37 / 42.5 August buy spreads, so also expresses a bullish outlook for earnings, trying to take advantage of today’s weakness and the downside. ‘Rising implied volatility to position for a potential rebound, “Khouw said. .
This trade breaks even at a price of $ 37.57, which is almost 19% more than where the stock ended Monday’s session, and records maximum profits at $ 42.50, or 34% more.
Nordstrom was up 4.75% in Tuesday’s session.
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