Bear shops for downside at Big Lots

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Big Lots has been struggling to break a three-month downtrend, and one bear doubts that it will succeed.

BIG Chart optionMONSTER's Depth Charge tracking system detected the purchase of 8,469 January 27.50 puts, mostly for $1.42, and the sale of an equal number of January 25 puts for about $0.82. Volume was more than 61 times open interest in both strikes.

BIG fell 3.83 percent to $33.39 on Friday, and is down 16 percent in the last three months. The discount retailer narrowly beat analysts' forecasts the last time it reported earnings on May 27. It also gapped lower on June 22 following a downgrade from JP Morgan, which cited insider selling.

The shares attempted to rally back since  but appear to be hitting resistance at their 50-day moving average (red line on chart). Some chart watchers may consider that as evidence the downward momentum is still in effect.

Friday's option trade, known as a bearish put spread, is designed to leverage such a move to the downside. It cost a net $0.60 to implement and will generate a maximum profit of 317 percent if BIG closes at or below $25 on expiration. (See our Education section)

The transaction pushed overall options volume in the name to 29 times greater than average. Puts accounted for 98 percent of the activity.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing , Options


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