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Why trader is selling Lululemon puts

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Lululemon Athletica has erased all of its recent losses, and one trader is betting on a floor beneath its shares in coming months.

optionMONSTER's tracking systems detected the sale of 2,600 June 62.50 puts in one print for $1.70 yesterday. The volume was above the strike's open interest of 1,552 contracts before the session began, indicating that this is a new position.

The put seller is looking for LULU to stay above $62.50 through expiration in mid-June. The trader will face the obligation to buy the stock if it falls below that level, though at an effective price of $60.80 once the credit from the put sale is included. (See our Education section)

LULU surged 8.06 percent yesterday to $73.89. The athletic-wear retailer declined from above $70 to the $62 level in March after a poor earnings report and continued fallout from the widely publicized recall of its yoga pants, but the stock has recovered all of that ground this month.

The company, which saw bullish call buying last week, has not yet scheduled its first-quarter earnings report. Total option volume in the name was 6 times its daily average yesterday.

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