MW – Men’s Wearhouse Inc. – One early-bird bearish options investor lumbered across the July contract on the specialty retailer of men’s suits to purchase a plain vanilla debit put spread. The pessimistic play indicates the trader expects MW’s share price to continue lower ahead of expiration day. Men’s Wearhouse shares are trading 2.10% lower at $21.24 just ahead of 10:30 am (ET). The bearish trader purchased 1,000 puts at the July $20 strike for a premium of $1.77 apiece, and sold the same number of puts at the lower July $17.5 strike for $0.79 each. The net cost of the transaction amounts to $0.98 per contract. Thus, the investor is positioned to amass maximum potential profits of $1.52 per contract if shares of the underlying stock plummet 17.6% from the current price to $17.50 by expiration day in July. The put-spreader makes money as long as shares trade below the effective breakeven price of $19.02 by expiration. Options implied volatility on Men’s Wearhouse is up 4.6% at 73.79% as of 10:31 am (ET).
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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