Traders bet lows are in for Lowe's

Options Action: Lowe's gets hammered

Shares of Lowe's have been getting hammered over the past month, and now some traders are betting it will only get worse for the home improvement giant.

On Thursday, the stock dropped more than 2 percent to $68.80, a level not seen in nearly three months. In the options market, bearish bets outpaced bulls by an astounding 21-to-1 ratio, and two trades show that the bears are looking for things to get grizzly with the stock in the near term.

The first notable trade happened in the middle of the session. A trader bought 8,341 contracts of the May 70-strike puts for an average of $1.48 each. A put is a bearish bet allowing purchasers to sell a stock at set price within a specific timeframe.

As each contract controls 100 shares, the trader was betting over $1.2 million that Lowe's will move below $70 in the next two weeks.

But the bears weren't done with Lowe's yet. They came back into the market growling for more puts—and this time they had a much larger appetite.

Toward the end of the session, another trader took a turn at betting that Lowe's shares will be sawed. That trader bought 86,688 of the 67.50-strike May puts for an average of 80 cents each. In this case, the trader is wagering nearly $7 million that Lowe's will sink at least another 3 percent or below $66.70 in two weeks.

Yet by the closing bell, both trades were already profitable. The 70-strike puts closed on Thursday at $2.20, meaning that trader saw more than $600,000 in marked-to-market profit or a 49 percent return in just a few hours.

The 67.50-strike puts closed at $1.07. Thus the larger trader saw a slightly more modest return—34 percent. But because of the larger size, the mark-to-market profit in those few remaining minutes was $1.8 million.

According to options expert Mike Khouw, the expiration of the choice expiration date for these two options was particularly noteworthy.

"What's interesting, of course, is that those expire on May 15, which is prior to the week when both Home Depot and Lowe's announce earnings," said Khouw, a CNBC contributor. "So they actually are looking at more downside to come even before earnings."

Home Depot is set to report earnings on May 19 while Lowe's is the following day.

Though Lowe's is now trading below its 100-day moving average, it is still up 49 percent over the past 12 months.