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• Treasury fund faces bearish spread
• Put seller views Elan on solid ground

• ROST 67% Rate It

Ross Stores has been going straight up, and one investor wants protection.

optionMONSTER's Depth Charge tracking system detected the purchase of 1,978 September 65 puts for $2.54 and the sale of 3,956 September 60 puts for $1.02. Volume was more than 50 times open interest at both strikes.

The trade cost $0.50 and will earn a maximum profit of 900 percent if the discount retailer closes at $60 on expiration. It's known as a ratio spread because twice as many contracts were sold further from the money than the number bought near the money .

Investors often use put ratio spreads to protect long positions . Yesterday's trade stands to earn leveraged gains on a modest pullback. It also obligates the investor to buy more shares if ROST goes below $60, but he or she might well be willing to do that.

If done in isolation as a simple bearish trade, the ratio spread would take its maximum profit with the stock at $60. Gains erode below that level and turn to losses under $55. (See our Education section)

ROST fell 0.72 percent to $66.42 but is up 40 percent so far this year. The next scheduled event that could serve as a potential catalyst is the release of July same-store sales on Aug. 2.

Overall option volume was quadruple the daily average yesterday, with puts outnumbering calls by 5 to 1, according to the Depth Charge.

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