Men's Warehouse: Dressed Down

Dec.10.09 | About: Tailored Brands, (TLRD)

by David Russell

Men's Wearhouse (MW) is promising investors a lump of coal for Christmas, and now it's getting taken to the cleaners.

MW Chart

MW forecast an unexpected fiscal fourth-quarter loss, citing a decline in comparable-store sales. Investors dressed down the shares by as much as 16 percent and options volume surged to nine times greater than average.

The December 20 calls were the busiest options contracts, trading 1,225 times against open interest of 1,031 contracts. Most of the volume resulted from an investor selling a block of the calls for $0.25, probably bailing on a money-losing long position.

MW has been clawing its way back since gapping lower on the open and is trading at $19.67 this afternoon.

The December 20 puts were also actively bought for $1.40 to $1.80, and sold for $0.95 to $1.20. The buyers are apparently positioning for the stock to push lower, while the selling probably results from shareholders dumping protection after unloading the stock.

Other investors wagered on a rebound and purchased more than 650 January 20 calls. Institutional-sized trades priced for $0.75 to $0.80, according to optionMONSTER data.

(Chart courtesy of tradeMONSTER)