Bounce in Big Lots brings out the bears

By David Russell,

Shutterstock photo

Big Lots has rebounded from a selloff, and now the bears are back.

optionMONSTER's Depth Charge monitoring system detected the purchase of about 2,900 August 40 puts for $1.60 and the sale of an equal number of August 35 puts for about $0.39. Volume was more than 6 times open interest in each strike.

This bearish put spread cost a net $1.21 to open and will earn a maximum profit of 313 percent if the discount retailer closes at or below $35 on expiration. (See our Education section)

BIG rose 1.67 percent to $40.79 on Friday. It gapped lower in April after cutting its same-store sales guidance but has rebounded more than 15 percent since then. Some chart watchers may interpret that price action as a bearish " flag " pattern and expect another push to the downside.

The shares also appear to be hitting resistance at their 100-day moving average. A put spread is a common way to take a bearish position with limited risk, unlike shorting the stock outright.

Overall option volume was 16 times greater than average on Friday, with puts outnumbering calls by 10 to 1.

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

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: BIG

More from optionMONSTER




Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by