Unusual Options Activity: Kohl’s Corporation (KSS)

Department store chain Kohl’s Corporation (KSS) is down nearly 30 percent over the past year. One trader sees shares declining further in the weeks ahead.

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  • That’s based on the November $17.50 puts. With 44 days until expiration, 10,126 contracts traded compared to a prior open interest of 138, for a 73-fold rise in volume on the trade. The buyer of the puts paid $0.45 to make the bearish bet.

    Kohl’s shares recently traded for about $20, so they would need to drop $2.50, or about 13 percent, for the trade to move in-the-money. The strike price is also right near the stock’s 52-week low of $17.89.

    The company’s selloff is justified, as earnings have dropped by 60 percent in the past year. Revenues are down by 5 percent.

    Plus, Kohl’s has nearly $8 billion in debt, compared to having just a over $2 billion in equity, making the company heavily leveraged and at risk of bankruptcy in the next few years.

  • Special: $1,300 into $45,000 in just 4 MONTHS?!
  • Action to take: Investors should avoid for now. Shares currently pay a dividend of about 10 percent, but the payout is higher than the company’s earnings, and the dividend looks likely to get cut. That could help push shares lower in the coming months.

    For traders, the November puts look like an attractive short-term play, as shares could continue lower even if the rest of the stock market trends higher.


    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.

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