Dollar Tree has been soaring, but one investor is worried that it may topple.
optionMONSTER's Depth Charge monitoring system detected the purchase of about 3,100 June 100 puts for an average premium of $3.55 and the sale of a matching number of June 85 puts for $0.25. Volume was more than 15 times open interest at both strikes.
The trade cost $3.30 and will earn a maximum profit of 355 percent if the discount-retail stock closes at or below $85 on expiration. It's known as a put spread because it leverages a move between two prices. (See our Education section)
DLTR is down 1.59 percent to $101.08 in midday trading but is up 66 percent in the last year. The company has enjoyed a secular boom of consumers looking to save money on everyday items, in the process taking customers from larger stores such as Wal-Mart.
The stock is now hovering near its all-time high established earlier in the month, which could make some traders nervous about a correction. That appears to be the rationale behind today's trade.
Overall option volume is 5 times greater than average so far today, according to Depth Charge. Puts outnumber calls by 11 to 1.
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