Tiffany Options (TIF): Unusual Trading Activity

| June 13, 2012 | 0 Comments

TIF OptionsOptions on high end jeweler Tiffany (TIF) are experiencing unusual activity today.

Tiffany’s doesn’t normally trade many option contracts. This is simply because it’s a name that options traders don’t pay a lot of attention to.

But that could be about to change… and not in a good way!

Today’s retail sales number came in a little light.  And global uncertainty remains high.  This is something that just won’t go away.

As a result, options traders are obviously getting spooked.

Tiffany is down 1.3% this morning at $54.80.

And today’s large option trade in TIF reflects that in a big way.  Our tracking system picked up a single trader coming in and purchasing 3,000 August $50 put contracts at a price of $1.57 apiece.

The total cost of the trade was $471,000.

It’s a highly bearish trade to say the least.

Don’t forget, this is a straight put position with unlimited upside potential as long as TIF continues falling in value.

I think this trade has a good chance of success.  In the midst of all the recent market carnage, retail is starting to buckle.

As you know, Tiffany is an international jeweler and specialty retailer.

They design and sell fine jewelry in addition to fine china, fashion accessories, timepieces, fragrances, and gift items.  Their products are sold through more than 240 retail stores in the United States and abroad.

The jeweler also offers their trademarked merchandise on the web through their online catalog.

So why is this option trader negative on Tiffany’s all of a sudden?

One reason could be that several analysts are now saying the high end consumer is beginning to become unglued. This doesn’t bode well for Tiffany as these individuals are their primary customers.

Analysts are also pointing out that high end jewelry is less recession-resistant than believed before 2008.  This could be because if we relapse into another recession, retail could come to a complete halt for all consumers.

In addition, Tiffany is overly dependent on the New York market.   Roughly 10% of the company’s sales come from the Manhattan flagship store.  If the US slides back into recession and sales drop at the Manhattan store, TIF will have a tough time growing revenues.

Tokyo Ginza similarly represents around 3% of sales, and Japan represents an even greater proportion of profits than sales.  And all of these countries are growing slower than expected.

Lastly, recent fluctuations in diamond and precious metal costs could severely pressure sales and margins moving forward.

So, with all of this negative information swirling around Tiffany, the idea of buying some puts here makes a lot of sense.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.