Williams-Sonoma tried to rally ahead of earnings results, but some traders have other ideas.
The seller of kitchen supplies was up 3 percent early in the session after Canaccord Genuity raised its price target to $57 from $55. There was also bullish option action in the name on Friday , but the bears quickly stepped in today.
optionMONSTER's Depth Charge tracking program detected the purchase of more than 2,200 March 46 puts for $1.10 to $1.63 in volume that was almost twice the previous open interest in the strike. The April 46 puts were also bought in smaller size for $2.38.
WSM quickly fell and is now down 0.33 percent to $45.11 in afternoon trading. The puts lock in the price where investors can sell shares, no matter how far they may fall. That gives them an inverse correlation to the stock price, so they appreciate to the downside. (See our Education section)
The stock has been sitting near all-time highs, trying to consolidate above its previous peak in 2005 and 2006. It had gapped higher in August following a strong quarterly report, but the last release in November disappointed the market.
The next set of numbers will probably be announced in the next couple of weeks, before the March options expire, but the timing hasn't yet been disclosed.
Overall option volume is 17 times greater than average so far today, with puts accounting for almost three-quarters of the total.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.