Someone Is Betting More Than $750K That Footlocker Will Drop
The NBA finals are now over…
For sports fans, that means no more exciting games, no more heartbreaking injuries and no more shots of the entire city of Toronto celebrating their improbable run to upset the three-peat attempt of the Golden State Warriors.
But for investors, this means something else.
For one, it means no more coverage of the newest Nike colorway shoes that Kevin Durant will be wearing or the new Under Armour shoes that Stephen Curry is wearing. It also marks the end of the speculation over the quiet wildcard (and NBA Finals MVP), Kawhi Leonard, who shocked the world when he signed a shoe deal with New Balance.
In other words, the nightly shoe coverage is over – which ends the “free” publicity for a company like Nike.
Combine that with Chinese trade war worries – which continue to weigh on a stock like Nike – and you can understand why Nike is down 14% from its highs in mid-April. If we see any continued global slowdown – or escalating trade war news – this downside could accelerate even more.
That’s what brings us to Foot Locker (NYSE: FL).
On May 24, Foot Locker dropped 16% after reporting weak earnings. But apparently someone doesn’t think the downside is over.
Last Friday, someone bought 1,455 Foot Locker September $45 puts. As of last Friday, there were more than 4,000 of these puts sitting in open interest. You can tell they really wanted these contracts because they bought them at the asking price for $5.20 each.
With Foot Locker stock trading at $43 – and around 98 days until expiration – this was clearly a $756,600 bet that Foot Locker is headed lower.
Action Plan: After falling to around $40 in reaction to its latest earnings, Foot Locker has since recovered a bit to around $43. However, it feels like this put buyer is shorting this bounce. Perhaps they are looking at Foot Locker’s low in late 2017 of around $30 as their target price by expiration in September 2019.
This is something we’ll monitor for a put play in The War Room!