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Bears Cozy Up to Sears Holdings Corp (SHLD)

Following a cautionary note from Moody's, SHLD put buying accelerates

by 12/11/2013 3:06 PM
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Option Brief: Sears Holdings Corp (NASDAQ:SHLD) hasn't done anything too exciting on the charts today, down 0.3% at $46.74. However, things are quite different in the options pits, where SHLD put volume is running at a more than six-fold mark-up to expected intraday levels.

This is mostly due to the attention being paid to the retailer's January 2014 39-strike put. Nearly 24,000 contracts have traded at the strike (including a block of 16,379), versus just 1,030 in open interest -- suggesting the initiation of new positions. On top of that, the majority of the contracts swapped hands off the ask price, implied volatility has surged, and data from the International Securities Exchange (ISE) and Trade-Alert indicates buy-to-open activity.

That said, today's put buyers anticipate SHLD will sink over the next five-plus weeks. Specifically, the speculators bet that the shares will descend from their current levels below the strike, by the close on Jan. 20, 2014. If the stock refuses to comply -- indeed, SHLD hasn't explored territory south of $39 on an intraday basis since late August -- the traders risk parting with 100% of their initial cash outlay.

One fundamental factor that may work in the bears' favor, however, is Sears Holdings Corp's (NASDAQ:SHLD) vulnerable credit status. Yesterday, Moody's Investors Service said that the potential spinoff of SHLD's Lands' End brand could have negative credit implications in the future.


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