Options Bears Sniffing Around Nordstrom Stock

The equity is down 64% this year

Digital Content Manager
Aug 26, 2020 at 2:31 PM
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The shares of Nordstrom, Inc. (NYSE:JWN) are down 4.9% at $14.78 this afternoon, after the luxury retailer reported adjusted second-quarter losses of $1.62 on $1.86 billion in revenue, which were significantly wider than Wall Street's estimates of $1.42 on $2.38 billion revenue. The company attributed the disappointing results to stores being shut down during the pandemic, as well as a lower demand for designer items as consumers stayed home. As a result, JWN received no less than six price-target cuts this morning, the lowest coming from UBS to $11 from $12.

On the charts, the equity has suffered a steep fall from this year's pre-pandemic levels near the $43 mark. JWN hit a 10-year rock bottom of $12.27 on April 3, and has been struggling to recover ever since. Though the shares attempted a rally to the $25 level in June, that effort was quickly capped by their 100-day moving average, which in combination with overhead pressure at the $18 mark is keeping a tight lid on the security. Longer term, Nordstrom stock sports a 63.8% deficit year-to-date.

JWN

Analysts were pessimistic toward the security coming into today, with 12 of the 14 in coverage sporting a tepid "hold" or worse rating, while only one carried a "strong buy." There's similar sentiment among short sellers, with the 4.27 million shares sold short accounting for a whopping 35.7% of the stock's available float.

That pessimistic sentiment is not echoed in the options pits, however, where calls are far more popular. The stock sports a 50-day call/put volume ratio of 3.22 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 97th percentile of its annual range. This suggests a healthier-than-usual appetite for bullish bets of late. Given the amount of short interest tied up in JWN, its possible some of these calls could be shorts seeking an options hedge against any unexpected upside.

And yet, today's options activity paints a different picture. So far, 76,000 puts have crossed the tape -- 23 times the average intraday amount, and more than triple the number of calls traded. Most popular is the weekly 9/4 12.5-strike put, followed closely by the weekly 08/28 14-strike put, with positions currently being opened at the first.  

 

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