Unusual Options Activity: Nordstrom (JWN)

Shares of department store chain Nordstrom (JWN) have been trading in a range year-to-date. Shares now trade at the lower end of that range, and one trader is betting on a move higher.

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  • That’s based on the August $32.50 calls. Over 8,975 contracts traded, an 84-fold jump in volume over the prior open interest of 107. The buyer of the calls paid about $2.19 to make the trade.

    With shares currently around $32.70, the option is an at-the-money trade, and could deliver solid returns should shares have one of their periodic bounces up to the higher end of their range in the low $40s.

    The options will expire shortly before the company next reports earnings in late August.

    Action to take: Trading rangebound stocks can be profitable, provided it’s done consistently. With shares at the low end of their range, they do risk going lower and breaking the range. But there’s a good chance that if the range holds, the bounce will be strong.

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  • Traders may like this trade to beat the slow summer trading season, as the option could deliver mid-double-digit profits in the coming weeks. Without a quick move higher in shares however, the option will start to bleed out, so traders should look to take a quick profit.

     

    Disclosure: The author of this article has no position in the company mentioned here, and does not intend to make any trades after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.