Why one trader is selling puts in Saks

Mike Yamamoto (mike.yamamoto@optionmonster.com)
May 20, 2013

Saks is getting an early vote of confidence before it reports earnings tomorrow morning.

optionMONSTER's tracking systems show that 2,455 November 11 puts were sold in 4 minutes on Friday for an average price of $0.82. Open interest in the strike was just 282 contracts before the session began, indicating that this is a new short-put position.

The put seller is betting that SKS will stay above $11 through mid-November, in the middle of a range that goes back to early 2012. If the stock drops below that level, the trader will be on the hook to buy shares at an effective price of about $10.18 once the credit from the put sale is factored in. (See our Education section)

SKS was down 0.5 percent on Friday to close at $11.85, near a resistance level around $12 that has been in place for more than two years. The luxury retailer spiked to $12.16 on April 12, its highest price since April 2011.

The company is schedule to report first-quarter results tomorrow at 9:30 a.m. ET . Total option volume in the name was 4,276 contracts on Friday, 5.5 times its daily average for the last month. 

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