Learn the trade here. Make it on tradeMONSTER

Options Trading News

November 23, 2012  Fri 9:26 AM CT

KSS: SEE CHART GET CHAIN FIND STRATEGIES

Kohl's has been trying to work its way higher, and one investor expects a rally over the next month.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 1,250 December 52.50 calls for about $0.87. Some 1,700 December 50 puts were sold at the same time for $0.63. Volume exceeded open interest at both strikes, indicating that new positions were initiated.

The trade resulted in a small credit of about $1,060, and is highly leveraged to upside in the Wisconsin-based retailer. A rally will inflate the value of the calls owned and diminish the value of the puts sold short, while the opposite will happen to the downside.

The unusual thing about the strategy is that the investor sold more puts than the number of calls they bought.  That let them offset the greater cost of the calls, and reflects confidence that downside is limited. (See our Education Section for more.)

KSS rose 0.50 percent to $52.23 in morning trading. The stock has been moving sideways for the last five years, but in recent months has been finding support at higher levels. That could make some chart watchers think it's preparing for a rally, despite guidance being mostly weak.

The bullish combination strategy pushed total option volume in the name to almost twice the daily average, according to Heat Seeker.

Share this article with your friends


Related Stories

KSS

Kohl's bulls shopping for breakout

August 11, 2014

The department store operator has been trapped in a range for years, but traders think a breakout may occur as early as this week.

Premium Services

Education & Strategy

It's all skewed up

Most new option traders know little about implied volatility, and learn the hard way. Today we want to help you...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER