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.