U.S. Markets open in 1 hr 12 mins

Near-term bearish position in Gap

Mike Yamamoto (mike.yamamoto@optionmonster.com)

The Gap is trading at its highest level in more than 13 years, but options are positioning for a near-term pullback.

optionMONSTER's Depth Charge system found heavy buying in the August 46 puts as more than 5,100 contracts traded yesterday, led by a print of 3,993 purchased for $0.86. The volume was far above the strike's open interest of just 778 contracts before the session began, indicating that these are new purchases.

The puts lock in the price where the stock can be sold no matter how far it might fall by expiration at the end of next week, allowing traders to protect a long position or make an outright bearish bet on a drop. But these options, which will track the share price closely because they are essentially at the money , will lose value quickly if the stock rises. (See our Education section)

GPS fell 0.43 percent yesterday to close at $46.28 after reaching $46.53 in the morning. That was just $0.03 shy of Friday's peak, its highest price since April 2010.

The apparel retailer is scheduled to report second-quarter results on Aug. 22.

Total option volume in GPS topped 9,900 contracts yesterday, more than 3.5 times its daily average for the last month. Overall puts outpaced calls by 2 to 1. 

More From optionMONSTER