Shares of apparel chain Burlington Stores (BURL) are down about 33 percent in the past year. One trader sees a further decline ahead for shares.
That’s based on the March 2023 $150 put. With 106 days until expiration, 3,233 contracts traded compared to a prior open interest of 110, for a 29-fold rise in volume on the trade. The buyer of the puts paid $7.55 to make the bearish bet.
Shares recently traded for just under $200, so it would take a nearly 25 percent drop in shares for the options to move in-the-money. The stock is up quite strongly from its 52-week low in September just under $107 per share.
Burlington stock looks potentially weak going into the holiday season. Besides the massive rally in shares recently, the stock has grown earnings by 23 percent, but overall revenue is down 11 percent in the past year. A weaker-than-expected retail season could lead to shares tumbling lower again.
Action to take: Investors should avoid shares for now. The stock doesn’t pay a dividend, and the big-box retailers are a better place for investors interested in retail stocks.
For traders, the puts may or may not move in-the-money. But on a drop in shares, they can likely deliver at least mid-double-digit gains at some point in the coming months. Traders may want to look for an up day for shares to get into the trade.
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.