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Sizable Options Trade Initiated On Men’s Wearhouse

Today’s tickers: MW & BBD

MW - Men’s Wearhouse, Inc. – A three-legged options trade initiated on men’s apparel retailer, Men’s Wearhouse, this morning prepares for shares in the name to potentially dip to the lowest level since April during the next few months. The stock is down 2.0% today to stand at $37.95 as of 11:30 a.m. ET. It looks like one trader sold call options to partially offset the cost of buying a bear put spread on the stock. The strategist appears to have purchased a 3,075-lot Nov $32/$38 put spread at a net premium of $2.25 each, and sold 3,075 Nov $40 calls at a premium of $1.90 apiece, reducing the net cost of the position to $0.35 per contract. The trader starts making money if shares in MW decline 0.80% from the current price of $37.95 to trade below the effective breakeven point on the downside at $37.65. Maximum potential profits of $5.65 per contract are available on the position should shares in Men’s Wearhouse drop more than 15% to $32.00 by November expiration. The options play may be an outright bearish bet on the stock, or could be a protective play to hedge a long position in the underlying shares. Men’s Wearhouse is scheduled to report second-quarter earnings after the closing bell on September 11th.

BBD - Banco Bradesco SA – Activity in Banco Bradesco options today suggests traders are positioning for heightened volatility in the price of the underlying in the near term. Overall options volume on BBD of around 1,550 contracts just before midday in New York is more than twice the stock’s average daily volume of 720 contracts, with much of the trading centered in the September expiry options. Shares in the name, down roughly 25% year to date, are currently off 1.3% on the session at $12.29. Traders appear to be buying both call and put options on BBD, with the Sep $12 strike contracts seeing the most volume. It looks like roughly 340 of the Sep $12 strike puts were purchased at an average premium of $0.43 each, and around 410 of the $12 calls were picked up at an average premium of $0.52 apiece. Call buyers stand ready to profit from a 1.9% rally over the current price to top the average breakeven point at $12.52, while put buyers make money at expiration should the stock decline 6.0% to $11.57. Bearish traders also looked to the Sep $11 strike, purchasing more than 250 lots at an average premium of $0.16 per contract. Finally, more than 300 of the Sep $13 strike calls were purchased in the early going for an average premium of $0.16 apiece. The contracts make money at expiration if shares in Banco Bradesco rally 7.0% over the current level to exceed $13.16. Shares in BBD last traded above $13.16 at the end of July.

 

Caitlin Duffy
Equity Options Analyst


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