Sears Holdings - SHLD - close: 46.31 change: -0.55

Stop Loss: 50.05
Target(s): 40.15
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
SHLD is in the services sector. The company operates over 2,000 major retail locations. The stock managed to shrug off a very ugly earnings report back in late November. Unfortunately a disappointing Black Friday four-day shopping weekend for the retail sector didn't help SHLD. Now investors seem concerned over news that SHLD is planning to spin off its Lands' End business. Then there was news that ESL partners had reduced their stake in the company. All of this negative news has yanked the rug out from underneath SHLD shares.

Today saw a huge spike in traders buying put options on SHLD. For example, the 2014 January $39 puts saw volume today of 24,538 contracts compared to the prior open interest of only 1,030 contracts. Somebody expects a lot more weakness ahead and momentum definitely favors the bears.

Tonight we are suggesting small, speculative put positions. I'm suggesting we launch positions at the opening bell tomorrow. Our short-term target is $40.15. Keep in mind that there are already a lot of bears in this stock. The most recent data listed short interest at 56% of the 50.7 million share float. That's plenty of fuel for a short squeeze if the stock can bounce. It's another reason to keep your position size small.

*Buy puts at the opening bell*

- Suggested Positions -

buy the 2014 Jan $39 PUT (SHLD1418m39) current ask $1.68

Annotated Chart:

Entry on December -- at $---.--
Average Daily Volume = 1.5 million
Listed on December 11, 2013