Bears Shop at Coach Ahead of Earnings

By David Russell of OptionMonster
 
NEW YORK -- Coach (COH) has been struggling, and option traders are shopping for a drop as the accessories retailer approaches its next earnings report.
 
OptionMonster's tracking systems show that a trader paid $1.20 to buy  9,100 Weekly 48 puts that expire on May 2. An equal number of Weekly 45 puts were sold at the same expiration for 90 cents. Volume was more than 280 times the previous open interest in each strike, indicating that new positions were initiated.
 
Known as a vertical spread, the trade will expand to $3 if COH closes at $45 or lower on expiration at the end of next week. That would represent profit of 233% based on its 90-cent cost.
 
COH fell 0.75% to $49.11 Monday and is down 13% so far this year. It has declined along with other retailers as increased competition squeezes profits. The company's next quarterly results are scheduled for April 29, so Monday's put spread would benefit from another poor report.
 
Total option volume in the name was nine times greater than average in Monday's session. Overall puts accounted for a bearish 83% of the total.
 
Russell has no positions in COH.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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