Nordstrom may have lost more than 3% in Monday's washout — but that price action emboldened, rather than deterred — at least one options trader to make a very bullish bet on the retailer's stock.
As of Monday's close, Nordstrom had lost 13% in the last week of trading. This trader looks to be betting that the bottom is in, and that the stock could jump as much as 34% by August expiration.
"We saw a big put sale early in the day on 2.4 times the average daily options volume, but that put sale is really more of a bullish bet; somebody taking advantage of the fact that people are expressing a great deal of distress, willing to get long on that stock at a lower level," Michael Khouw, chief investment officer at Optimize Advisors, said Monday on CNBC's "Fast Money."
That put sale was only half the story, though, as it looks like this trader used the premium they collected in that trade to finance an even more bullish call spread purchase.
"We saw somebody buying 3,000 of the August 37/42.5 call spreads, and so that's also expressing a bullish outlook going into earnings, trying to take advantage of today's weakness and elevations in implied volatility to position themselves for a potential rebound," said Khouw.
That trade breaks even at a stock price of $37.57, or nearly 19% higher than where the stock ended Monday's session, and sees maximum profits at $42.50, or 34% higher.
Nordstrom was up 4.75% in Tuesday's session.