Mike Khouw Sees Unusual Options Activity In Sears

CNBC Options Action's Mike Khouw said on the show that he is watching Sears SHLD because it had eight times higher options volume on Thursday than its average options volume.

The stock traded 7.15 percent lower Thursday after it posted earnings. Investors were trying to place bearish bets by purchasing the October 33 puts for $3. The breakeven for this trade is at $30 and investors are expecting that Sears is going to trade below that price on October expiration. Khouw explained that there is a high short interest in this name and investors are probably using options to make a bearish trade to protect against an eventual short squeeze.