Apparel manufacturer V.F. Corporation (VFC) is down 17% over the past year and trending lower. One trader sees a further decline in the weeks ahead.
That’s based on the August $15.50 puts. With 21 days until expiration, 5,237 contracts traded compared to a prior open interest of 163, for a 32-fold rise in volume on the trade. The buyer of the puts paid $0.89 to make the bearish bet.
VFC shares recently traded for about $16, making this an at-the-money trade. Shares are well off their 52-week low of $11 per share set back in May, but have started to show signs they’re ready to trend lower.
VFC lost over $950 million last year, and managed to see revenues drop by 13%. The company cut its dividend in half last year, and still pays out more than 5 times its earnings, suggesting a further cut or elimination of the dividend is likely.
Action to take: Shares have recently had a strong bounce higher, but look overbought in the short-term. Interested investors may be able to get a better price for shares in the months ahead given the likely weakness underway.
For traders, the August $15.50 puts are well positioned for a quick drawdown over the coming few days. The option can likely see high double-digit returns or better depending on the extent of the selloff.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.