Sears Holdings Corp (SHLD) Trader Braces for Long-Term Losses

Short sellers have targeted struggling Sears Holdings Corp


Published on Dec 26, 2014 at 10:57 AM
Updated on Apr 20, 2015 at 5:32 PM

Sears Holdings Corp (NASDAQ:SHLD) saw a rush of put volume during Wednesday's holiday-shortened session, with the contracts trading at 14 times the expected daily pace. Long-term options were heavily targeted, too, with four of the five most active strikes expiring in either the January 2016 or 2017 series.

Most notably, blocks of 9,062 January 2016 30-strike puts and 3,659 January 2016 35-strike puts were sold to close, while a block of 15,000 January 2017 20-strike puts was bought to open. In other words, this trader rolled her bearish bet on SHLD down and out. This theory is corroborated by Trade-Alert, which also speculates this may be a shareholder hedging her long stock position due to SHLD's technical weakness in 2014.

Speaking of which, SHLD has shed nearly 12% year-to-date to trade at $32.61, and continues to face overhead pressure from its 20-day moving average. Over the last two months, in fact, the equity has underperformed the broader S&P 500 Index (SPX) by 16.2 percentage points.

Not surprisingly, Sears Holdings Corp (NASDAQ:SHLD) has been on the radar of short sellers. Nearly 29% of the stock's float is sold short, which would take in excess of two weeks to buy back, at typical daily trading volumes.

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