Clothing manufacturer V.F. Corp (VFC) is down 7% over the past year, but have seen a bigger decline in recent weeks amid the rise of a new trade war. One trader sees shares continuing lower in the weeks ahead.
That’s based on the May 23 $10 puts. With 22 days until expiration, 10,168 contracts traded compared to a prior open position of 307, for a 33-fold rise in volume on the trade. The buyer of the puts paid $0.39 to make the bearish bet.
V.F. Corp shares recently traded for just over $11.50, so shares would need to decline by $1.50, or 13%, for the option to move in-the-money. The strike price is right near VFC’s 52-week low of $9.41.
Shares had been trending higher until the start of the year, with V.F. Corp hitting a high of $29.50 in January before pulling back. The company’s overseas manufacturing can’t be quickly built up in the United States amid the current trade war.
Action to take: Shares are well positioned as a trade either for or against a quick resolution to trade and tariff issues. For now, shares have started to build a potential base, but a recession later in the year from reduced trade could send shares lower. For now, investors may want to wait for a pullback to buy.
For traders, the May 23 $10 puts are well positioned for further weakness in shares over the coming weeks. Traders should look for a mid-double-digit returns and the potential to keep coming back to this stock for a trade.
Disclosure: The author of this article has no position in the company mentioned here, but may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.