Why trader is selling calls in Kohl's

optionMONSTER

Kohl's jumped after reporting earnings last week, but one trader sees limited upside as shares pull back.

optionMONSTER systems detected the sale of 8,140 June 52.50 calls in one print for the bid price of $0.70. The volume was more than twice the strike's previous open interest, so this is clearly a new position.

The calls weren't tied to any trading in the underlying shares identified by our systems yesterday, so they could have been sold naked with an initial bearish bias. But given how close the strike is to the stock price, it is much more likely that they were sold against long shares as a covered call position, which would be bullish up to the strike but not beyond. (See our Education section)

KSS fell 0.74 percent to $51.20 yesterday. The department-store operator gapped up from below $50 to above $52 after announcing first-quarter results on Thursday.

More than 11,000 KSS options changed hands yesterday, 4.5 times its daily average over the last month.


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