Shares of department store chain
Kohl’s Corporation (KSS) are down 44 percent over the past year. One trader sees a potential rebound in the next few weeks.
That’s based on the March $30 calls. With 31 days until expiration, 5,143 contracts traded compared to a prior open interest of 116, for a 44-fold rise in volume on the trade. The buyer of the calls paid $3.40 to make the bullish bet.
The stock recently traded for about $32, so shares are already $2.00 in-the-money. The stock is also well off its 52-week lows of $23.38.
Earnings dropped 60 percent over the past year, even as revenues dipped by just 7 percent. A slowdown in consumer spending could further weigh on shares over the long term. But on a technical basis Kohl’s looks oversold in the short-term.
Action to take: Shares have been beaten down heavily enough that the stock yields 6 percent. And even with the slowdown, shares trade at about 9 times current and forward earnings. That could make the stock a worthwhile buy as a value play.
For traders, the March calls could deliver mid-double-digit returns, as they’re already an in-the-money trade. That’s true even if shares don’t move too much higher in the months ahead, given the economic headwinds the company faces.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.
