Big Lots has been struggling to break a three-month downtrend,
and one bear doubts that it will succeed.
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
(Chart courtesy of tradeMONSTER)
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