Downside strategy takes aim at Kohl's
Chris McKhann | firstname.lastname@example.org
KSS slipped 0.18 percent to $49.72 yesterday. Shares of the department-store operator were below $43 a month ago, their lowest levels since September. The $52 level has been resistance throughout the year, with only one close just barely above that price in late February.
The option volume in the name totaled 19,200 contracts, compared to a daily average of 3,100. optionMONSTER's Depth Charge system shows that a trader bought 2,318 September 49 puts for $1.96 and, at the same time, sold 4,636 September 46 puts for $0.98. The previous open interest at each strike was fewer than 100, so this is a new ratio spread.
The put spread was opened for even money so it will not lose anything if KSS is above $49 at expiration, but the maximum profit would come with shares down around $46. The trader is also willing to get long shares below that level, as he or she would be obligated to do if assigned on the additional short puts. (See our Education section)