A bear put spread for the operator of restaurant and retail chain, Cracker Barrel Old Country Store, Inc (CBRL), appeared on our 'hot by options volume' market scanner late in the trading session. The play appeared after one long-term bearish options investor purchased a Bear Put Spread in the December contract.
The pessimistic player positioned for continued erosion in the price of the underlying shares by picking up approximately 2,300 puts at the December $40 strike for an average premium of $1.85 apiece
Selling roughly the same number of puts at the lower December $25 strike for an average premium of $0.85 a-pop
Net premium paid to initiate the spread amounts to $1.00 per contract
With the spread being so high, we believe this 'spread' play was made simply to reduce risk. The trader is expecting the stock to fall. We have gone from a high of $53.43 on April 22nd to $45.26 on July 7th. That is an 8 point plunge in just under three months. Since we presently sit at $47.50, it is concievable that if the stock stays steady, it will easily hit the '40' mark by September/ October-- long before December.
Disclosure: No position