Put Buyers Profit on Michael Kors Stock Earnings Reaction

KORS stock hit an annual low out of the gate this morning

Nov 7, 2018 at 10:08 AM
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The shares of Michael Kors Holdings Ltd (NYSE:KORS) have plunged 16% to trade at $48.50 -- fresh off a new annual low of $47.47. Although the retailer said fiscal second-quarter adjusted earnings arrived at $1.27 per share, more than analysts were expecting, the $1.25 billion in revenue it earned over the three-month period fell short and same-store sales slumped 2.1%. Plus, Michael Kors said revenue from European stores declined almost 10% last quarter.

Today's slide just exacerbates recent technical woes for KORS stock. Since topping out at a three-year high of $75.96 on Aug. 22, the shares have surrendered 36%. And while the equity found support near $54 earlier this month -- home to last November's post-earnings bull gap levels -- it has quickly breached this short-term foothold this morning.

Given Michael Kors stock's history of positive earnings reactions, though, one speculator initiated a modestly bullish position yesterday. Specifically, it looks as if someone yesterday sold to open two December 70 calls for each December 62.50 call they bought to open. If this is indicative of a call ratio spread, the trader expects KORS to rally right up to $70 by expiration at the close on Friday, Dec. 21, a level not seen since late September.

The weekly 11/9 series was also popular on Tuesday. While bulls bought to open the weekly 11/9 62-strike calls, bears purchased new positions at the weekly 11/9 54-strike puts. Those put buyers are currently staring at paper profits, too. Specifically, the price for the puts at last night's close was $1.50, and at last check, the ask price was $7.20.


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