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Option Trends: The Gap Inc., Safeway Inc., and Barnes & Noble, Inc.

Put option buyers have recently targeted GPS, SWY, and BKS

by 10/16/2013 12:23:48 PM
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Options buyers have been taking a bearish stance on retailing names The Gap Inc. (NYSE:GPS), Safeway Inc. (NYSE:SWY), and Barnes & Noble, Inc. (NYSE:BKS), according to volume data from the major options exchanges. In recent days and weeks, speculators have been scooping up put options on this trio of companies. Here is a closer look at the specifics.

Beginning with apparel retailer GPS, traders at the International Securities Exchange (ISE) have bought to open 6,475 puts in the last five trading days versus 415 calls, resulting in a put/call volume ratio of 15.60.

Expanding the scope to include data from the Chicago Board Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX), and looking back over the last two weeks, shows a 10-day put/call volume ratio of 2.41, which ranks 2 percentage points from a new annual high. In short, long puts have rarely been in greater demand during the last year.

This recent bearish speculation is not a huge surprise, as The Gap Inc. (NYSE:GPS) has dropped nearly 21% since reaching a 13-year high of $46.56 on Aug. 2. Last Friday, the stock gapped lower on disappointing same-store sales news, and has yet to bounce back, currently trading at $36.88.

Fresh off its earnings report from last Thursday, SWY has also seen put-skewed behavior in its options pits. During the last five days at the ISE, 1,096 puts have been purchased to open compared to 102 calls. Longer term, the stock's 50-day ISE/CBOE/PHLX put/call volume ratio weighs in at 1.24, a percentage point shy of an annual peak.

In a similar vein, Safeway's Schaeffer's put/call open interest ratio (SOIR) of 1.01 indicates that put open interest narrowly outweighs call open interest for options expiring in the next three months. This reading is higher than 83% of the past year's data, suggesting options players are more put-focused than usual.

SWY fell short of analysts' earnings estimates when it reported last week, but still managed a 6.9% gain (to a new multi-year peak) the subsequent session. This advance was spurred by a number of brokerage upgrades, along with news that the grocery name plans to exit the Chicago market. Given this backdrop -- and the fact that Safeway Inc. (NYSE:SWY) shares have more than doubled in value over the past 12 months to their present perch of $33.19 -- some of the recent put buying could be protective in nature.

Finally, enduring bookstore chain BKS has seen an influx of put demand of late. At the ISE during the past five sessions, 2,657 puts have been scooped up, versus a mere 17 calls, for a whopping five-day put/call volume ratio of 156.29. What's more, the 10-day ISE/CBOE/PHLX put/call volume ratio of 1.04 stands in the 91st annual percentile, within a chip shot of a pessimistic yearly peak.

Bearish speculation extends outside of the options pits, as well. More than 26% of BKS' float is currently sold short, as roughly 10.1 million shares have been shorted, amounting to a five-month high. At the stock's average pace of trading, it would take short sellers nearly seven trading days to exit their bearish positions.

On the charts, Barnes & Noble, Inc. (NYSE:BKS), currently perched at $13.53, continues to struggle after an earnings-induced bear gap in late August brought the shares to the $13 neighborhood. This region has acted as a bottom for the stock at several points during the last year.


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