Call Buyers Bet on Nordstrom Stock's Post-Earnings Pullback

The company posted a beat-and-raise for its second quarter

Digital Content Manager
Aug 25, 2021 at 11:01 AM
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Luxury retailer Nordstrom, Inc. (NYSE:JWN) is down 17.1% to trade at $31.33 at last check. While the department store name posted better-than-expected second-quarter earnings of 49 cents per share, as well as a revenue beat, the latter remains well below pre-pandemic levels. However, the company did raise its full-year guidance beyond Wall Street's estimates.

The brokerage bunch is mixed after the event. J.P. Morgan Securities downgraded the stock to "underweight" from "neutral," and cut its price objective to $34 from $39. Credit Suisse and Deutsche Bank also slashed their price targets, to $34 and $37, respectively, but BofA Global Research lifted its price objective to $22 from $19. Analysts were already bearish on JWN coming into today, with 10 of the 12 in question carrying a tepid "hold" or worse rating.

The good news is that JWN looks ripe for a short squeeze. Short interest jumped 7.3% in the last two reporting periods, and the 19.59 million shares sold short currently make up a 17.8% of the security's available float, or over a week's worth of pent-up buying power. 

Plus, a shift in sentiment in the options pits could boost the security. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), JWN's 10-day put/call volume ratio of 1.22 stands higher than 90% of readings from the past year. In other words, long puts have rarely been more popular. 

Meanwhile, call buyers took advantage of today's pullback. So far, 35,000 calls and 37,000 puts have already been exchanged, which is 18 times the intraday average. Most popular is the September 30 put, followed by the weekly 8/27 30-strike put, with positions being opened at both.  

The security has faced volatility on the chats over the past 12 months. However, the shares have bounced off the $31 mark before, which is an area that looks poised to contain this latest pullback. Longer term, JWN sports an impressive 99% year-over-year lead.

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