Option Bull Eyes Nordstrom as Stock Brushes Off Trump Tweet

Despite a scathing Trump tweet, shares of Nordstrom, Inc. (NYSE:JWN) took a sharp bounce off their lower Bollinger Band

Feb 8, 2017 at 3:27 PM
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President Donald Trump has turned his Twitter feed toward Nordstrom, Inc. (NYSE:JWN), after the retailer announced it will no longer sell Ivanka Trump's brand. Though Nordstrom said the move was due to declining sales, the president tweeted that JWN has treated his daughter "so unfairly." Nevertheless, the retail stock is trading up 3.4% at $44.24 -- after an earlier breach of its lower Bollinger Band -- and one options trader appears to be betting on an even bigger move over the long term.

Specifically, the January 2019 70-strike call is JWN's most active option amid a relatively low-volume session. This is due to a block of 1,000 contracts that was seemingly bought to open earlier for an initial cash outlay of $175,000 (number of contracts * $1.75 premium paid * 100 shares per contract). This is the most the speculator stands to lose, should the calls expire out of the money in January 2018. Profit, meanwhile, will accumulate on a move north of breakeven at $71.75 (strike plus premium paid) -- territory not charted since August 2015.

This bullish positioning just echoes the withstanding trend seen in JWN's option pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 12,009 calls over the past 10 sessions, compared to 1,370 puts. What's more, the resultant call/put volume ratio of 8.77 ranks just 3 percentage points from a 52-week peak.

What's more, JWN's Schaeffer's put/call open interest ratio (SOIR) of 0.32 indicates calls more than triple puts among options expiring in three months or less. This ratio is docked below 98% of all comparable readings taken in the past year, suggesting short-term options traders have rarely been as call-heavy toward JWN as they are now.

However, considering the stock is heavily shorted, it's possible that some of this call buying -- particularly at out-of-the-money strikes -- is a result of short sellers hedging against any upside risk. Short interest on JWN rose 8.6% in the most recent reporting period, and now accounts for nearly 22% of the stock's available float. In fact, outside of today's pop, shorts have seemingly been in control of Nordstrom, Inc. (NYSE:JWN) shares, with the stock off more than 28% from its early December high at $61.85.

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