Battered U.S. retailers’ shares draw bottom-pickers in option market

Some options players are betting that this year’s selloff in the shares of retailers may be overdone, at least for the near term.

More broadly, the S&P 500 Retailing index is down about 25% for the year, outpacing the 14% decline in the benchmark S&P 500 as consumers shift their spending amid soaring inflation. A $1.8 million sale of July 145 Target puts on May 31 is one example of traders betting on relief for retailers. A put seller stands to gain if the stock ceases to fall or rebounds.

“I would say investors are trying to pick a bottom ever since the big sell off mid-May,” said Chris Murphy, co-head of derivative strategy at Susquehanna, adding that he has noted similar trades in the options of Walmart, Gap and Target.Target, Walmart and Abercrombie & Fitch are attractive put-selling names for investors who expect the stocks’ recent underperformance to abate, Goldman Sachs said in a note on Monday.

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