Option bears triple their money in $KSS

It took just a weekend for bearish option traders to triple their money on downside positions in Kohl’s (KSS).

On Jul. 16, Market Rebellion’s Unusual Activity programs flagged the the purchase of 3,900 Weekly $50 puts, expiring this Friday, Jul. 23, for $0.82 to $1.08 with shares at $50.67. Volume was clearly above the previous open interest of 738 contracts, indicating that this was a new position.

Those puts sold for as much as $3.57 today so far, more than 3 times their purchase prices. The stock fell 7.87% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

KSS was last down by 3.56% to $47.65 this afternoon. The retailer is estimated to next report earnings on Aug. 17.