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Post-Earnings Bears Zero In on Lululemon Athletica inc. (LULU)

Put activity is surging on LULU today

by 12/12/2013 11:33 AM
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Option Brief: Lululemon Athletica inc. (NASDAQ:LULU) is taking a beating today, as the shares are off 11% to hover at $60.80 in the wake of this morning's poorly received turn in the earnings confessional. In fact, this drop has landed the yoga apparel guru on the short-sale restricted list. As a result, the stock's options pits are teeming with put activity, with approximately 30,000 contracts switching hands thus far -- about 10 times the equity's expected intraday put volume. By contrast, around 21,000 calls have been exchanged.

Digging deeper into the data, it appears that 15 of the 20 most active strikes in today's session are on the put side of the trading aisle. One option seeing notable attention is the weekly 12/13 60-strike put, where north of 2,200 contracts have crossed the tape. Since a large portion of these puts traded at the ask price -- and volume has exceeded current open interest levels -- it's probable that new bearish bets have been placed here. In other words, the put buyers are counting on LULU to backpedal south of $60 by tomorrow's close, when these weekly options expire.

Today's sharp decline has left Lululemon Athletica inc. (NASDAQ:LULU) with a year-to-date deficit of more than 20%. This earnings-induced setback comes on the heels of yesterday's news that founder Chip Wilson has stepped down as company chairman, after making some rather unsavory remarks about the firm's largely female-based clientele. Michael Casey, the director of LULU's board, will take his place.


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