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By David Russell

DSW Inc. (DSW) ripped to its highest price in almost two years Thursday, prompting bearish trades streamed into the specialty footwear retailer.
DSW ChartoptionMONSTER's Depth Charge tracking system detected a number of so-called risk-reversal trades Thursday morning as the stock approached $21. The transactions consisted of investors selling January 25 calls for $0.65 to $0.70 while buying January 17.50 puts for $1.05 to $1.10.

The strategy was used about 2,130 times, pushing options volume in DSW to 6,159 contracts--nine times greater than average. The trades resulted in net debits of about $0.40 and will earn profits from the stock falling below $17.10 by expiration.

DSW is up 15.12% to $20.33 in midday trading after management roughly doubled its full-year earnings guidance. Earlier the shares were as high as $21.29, their highest price since December 2007.

If placed in isolation, Thursday's options trades will generate losses if DSW climbs higher than $25. However, they could also have been implemented by a shareholder willing to sell for $25 and wishes to hedge against a potential correction. Such a strategy is known as a "collar."

DSW traded more than 2 million shares Thursday, making it the busiest session for the name since March 2008.

Source: DSW: Rising Stock Price Leads to Bearish Trades