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Big Options Trade in Jones Apparel — Why?

One big investor is positioning for a markdown in Jones Apparel Group, which has more than tripled this year and reports earnings tomorrow.

OptionMonster's real-time systems detected unusual buying of the November 15 puts, which traded 4,062 times for $0.25 to $0.30. Volume was more than eight times existing open interest in the strike.

CNBC/OptionMonster Trading School:

JNY stock is down 1.3 percent to $18.17 in midday trading and is little changed over the last month. The parent of clothing and shoe stores including Jones New York and Nine West has been losing momentum as it approaches the $20 area where it traded shortly before last year's stock-market collapse.

The company will report third-quarter earnings before the bell tomorrow. It reported better-than-expected sales and profit the last time it issued results on July 29.

JNY needs to fall about 19 percent by expiration for the puts bought today to turn a profit.

The trade pushed overall options volume in the name to six times greater than average. Puts outnumbered calls by 87 to 1.

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David Russell is a reporter and writer for OptionMonster.

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