Volume Spike Investor

There has been unusual options trading in Sears Holdings Corporation (NASDAQ: SHLD) today, and it is even more unusual now that this puts Sears Holdings at a new 52-Week low.  On first glance it appears like a straddle, but after looking closer it may just be a hedge for a short position on the stock.  Otherwise these options trades in the SEP09 $85 Calls & Puts would be hard to explain with the stock at $78.50.  But after looking at the other closer months contracts that have traded this does at least look like a new position.  16,000 contracts is representative of a 1.6 million shares block on a fully diluted or implied basis, which would imply this position is a hedging transaction for a $125 million position based upon today’s price.  Below are today’s contracts that have traded:

CONTRACT/STRIKE      Volume    OpInt
SEP08 $85.00 CALLS    16,016    9,822
SEP08 $85.00 PUTS      16,003    8,665

Other active contracts for Sears:

CONTRACT/STRIKE    Volume    OpInt
JUN08 $100 CALLS      6,000    24,375
JUN08 $100 PUTS        6,008    15,476
JUL08 $90 CALLS         3,303    21,098
JUL08 $90 CALLS         3,225    22,437

As a reminder, the full position and full reasoning behind the trade is never fully known if you aren’t the person that made the trade or that took the other side of the trade.  As of 12:36 OM EST the stock itself has already traded some 2.9 million shares traded hands with shares art $78.50.  The normal daily volume is 2.18 million shares.  The prior 52-week trading range had been $79.69 to $175.75.

Jon C. Ogg
June 18, 2008