Why bears are targeting Michael Kors

optionMONSTER

Michael Kors has been on an amazing run, but some investors are getting nervous as the founder takes profits.

optionMONSTER's Depth Charge monitoring program detected the purchase of 10,000 August 48 puts for $1.85 and the sale of an equal number of August 38 puts for $0.40. There was barely any open interest at either strike before the trade occurred, indicating that new money was being put to work.

The trade cost $1.45 and will earn a maximum profit of 590 percent if the Hong Kong-based fashion company closes at or below $38 on expiration in mid-August. (See our Education section for more on the strategy, which is known as a bearish put spread because it leverages a move between two prices.)

KORS rose 1.11 percent to $61.19 yesterday and is up 20 percent so far this year. The stock has more than doubled since its December 2011 initial public offering, fueled by strong quarterly results.

But the stock has struggled to advance since Feb. 19, when the company announced that its founding designer, Michael Kors, would sell more than one-third of his shares.

Total option volume in KORS was twice its daily average, with puts outnumbering calls by a bearish 4-to-1 ratio, according to the Depth Charge.



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