After the close on November 8, "name your own price" company Priceline.com (PCLN) reported third-quarter earnings that arrived 30 cents better than analyst expectations. What's more, the company guided higher for the fourth-quarter, also topping Wall Street's forward-looking projections. On the news, the shares skyrocketed through the century mark to trade at multi-years' highs not seen since the "Dot Com" era.
Surprisingly, options speculators have not responded with open arms, opting instead to place sizeable bets on the equity's perceived decline. According to data from the International Securities Exchange (ISE), some 2,189 puts were bought to open during Monday's trading, compared to just 333 calls bought to open. The resulting single-session put/call ratio indicates that roughly 6.5 puts were purchased for every 1 call, hinting at a growing bearish contingent in the wake of Priceline's (PCLN: sentiment, chart, options) solid fundamental performance.
This negativity is not wholly reflected in PCLN's Schaeffer's put/call open interest ratio (SOIR) as of yet, as the current reading of 0.85 falls just outside of what I would consider a bearish extreme, arriving in the 61st percentile of its annual range. However, looking at options translations from Monday, it seems that quite a bit of the puts purchased on the ISE could have been added to the 100 strike in the November series of options. Looking at our internal data, more than 1,500 puts were added at this strike yesterday.
Keep in mind that November options expire at the end of the week, making these speculative bets even more pessimistic in that investors are not only looking for a decline in PCLN shares, but they are expecting it before Friday. Looking ahead to December, there were some hefty put adds at the 95 strike, with nearly 1,000 contracts translating as fresh open interest. Peak put open interest for the month resides at the 85 strike, but building put open interest at the 95 and 100 levels could well offer up key options-related support for PCLN.
But options players are not the only investors betting against the shares, as short sellers now hold more than 21% of the stock's float as short positions. Furthermore, despite the accolades from the financial press and analysts following the company's earnings report, 4 of the 11 analysts still rate the shares a "hold" or worse. While upgrades may be unlikely in the current market environment, an unwinding of the heavy short positions could help usher PCLN shares even higher over the intermediate-term.
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