[Wednesday], and the two most active [contracts] were the 300-strike puts that expire next week, and also this week," said Khouw.
Buyers of the weekly 300-strike puts that expire after the bell on Friday paid an average of $3.75 per contract, placing their breakeven around $296.25 on Lululemon's underlying stock price, or just about 8.5% below where it closed Wednesday's session. That's slightly rich to the move that Lululemon is implying, but as Khouw would point out, there is a chance that at least some of these bets are hedges, rather than outright bearish speculation.
"One of the reasons [these traders] might be doing this? Lulu has been on an incredible tear," said Khouw. "So, maybe people are just trying to book some of the gains in Lulu they've seen so far."
On a market down day the basis of your option changes. Your opinion of say a 5% move on earnings from the current price may have become too low for a profit. So you get out. It does not change your opinion of the stock. Earnings could still be fine. tt:JimCramer1