As Stitch Fix shares unravel, one trader is betting on even more pain ahead

Stitch Fix has come undone.

Shares of the online personal styling service continued their slide lower on Wednesday after posting its worst day ever in the previous session. The sell-off was sparked by a decline in revenue and client estimates in the company's earnings report earlier this week. Stitch Fix shares are down nearly 50 percent since their mid-September high.

Dan Nathan of RiskReversal.com said the options market is implying there could be even more trouble ahead for the stock.

Nathan noted that there has been a surge in options trading in the stock; within the activity, he highlighted a buyer of the March 30 puts paying $4.60 per contract. This is a bearish bet that shares of Stitch Fix will fall below $25.40, or down nearly 8 percent, from its current levels.

"I suspect it was someone looking to play for lower lows or protect a longer position," Nathan explained Tuesday on CNBC's "Fast Money."

Despite the sell-off, shares of Stitch Fix are still up 8 percent on the year and more than 83 percent since its market debut back in November. However, Nathan said an over-exuberance surrounding the company's initial success may have sent shares too far too fast.

"[Stitch Fix] is marginally profitable, and they're starting to lose users, and revenues aren't growing at the rate to ... justify this valuation," he explained. "So I think options traders looking for protection for that gap below 30 bucks may be all the way down 20."

Shares of Stitch Fix were trading lower on Wednesday afternoon around $27.65.

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