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Lululemon gets vote of confidence

David Russell (david.russell@optionmonster.com)

Lululemon Athletica has fallen hard, but one investor apparently thinks that the stock is a survivor.

optionMONSTER's tracking programs detected the sale of 3,000 June 60 puts today, most of which priced for $6.15. Volume was almost triple open interest at the strike, indicating that new positions were initiated.

The put seller is now on the hook to buy shares in the yoga-apparel stock for $60 through expiration in mid-June no matter how far they may fall by then. Above that level the contracts expire worthless, and the trader would keep the $6.15 as profit.

The investor can still make money below it because of the credit received today. In fact, including that $6.15, the effective entry price would be $53.85, well below the stock's current level. (See our Education section)

LULU is up 0.2 percent to $59.28 in morning trading. It peaked over $80 in June and fell sharply on Dec. 12 after issuing weak sales guidance for current fiscal quarter. Management cited problems in the supply chain and increased competition.

Nonetheless, shares have been stabilizing since the drop and are now back above their 10-day moving average, which could make some chart watchers think that the worst of the selling is done for now.

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