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Why one trader sees floor in DSW

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Shoe retailer DSW has bounced back from a steep drop after its last earnings report, and one large trader apparently sees a limit to any downside in the next six weeks.

optionMONSTER's tracking systems detected the sale of 9,500 June 60 puts in one block for $0.35. This is clearly a new position, as the open interest in the strike was 1,080 contracts before the trade appeared.

This put seller is betting that DSW will stay above the $60 strike price through expiration in mid-June. If the stock falls below that level, the trader will be on the hook to buy shares at an effective price of $59.65 including the $0.35 credit from the put sale. (See our Education section)

DSW rose 1.38 percent on Friday to close at $68.81. The stock gapped down from about $67 to below $63 in March after the company missed earnings estimates and issued weak guidance. But the shares have recovered all of those losses and now nearing an overhead resistance level that goes back to early December 2012.   

More than 10,400 options change hands in the name on Friday, compared with a daily average of just 153 contracts in the last month.

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