EARN25

Options Bears Pounce as Same-Store Sales Gash Gap Inc (GPS)

Gap Inc's (GPS) disappointing same-store sales have landed the retail stock on the short-sale restricted list

Apr 8, 2016 at 10:41 AM
facebook X logo linkedin


Gap Inc (NYSE:GPS) is a house on fire this morning, dropping over 12% after reporting a sharper-than-expected 6% year-over-year drop in March same-store sales. Citigroup is fanning the flames, too, cutting its price target on GPS to $25 from $26. With GPS stock on the short-sale restricted list, traders are piling into its options pits -- especially on the put side of the aisle.

By the numbers, over 10,000 put options have been exchanged -- 10 times the expected intraday amount, and more than doubling the number of calls on the tape. Most active is the weekly 4/8 25-strike put, which traders are buying to open -- hoping GPS extends its slide south of $25 through tonight's close, when the series expires. At last check, the shares were hovering around $24.25.

Over the last month, option buyers have targeted GPS puts over calls at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, the retail stock's 20-day put/call volume ratio of 1.93 shows long puts have nearly doubled long calls.

As a result, open interest on options expiring in the next three months is tilted decidedly in the direction of puts. This observation is clear from GPS' Schaeffer's put/call open interest ratio (SOIR) of 1.96, which also ranks in the put-skewed top quartile of its annual range.

Even looking beyond the options pits, bearish sentiment prevails. Eighteen of 21 analysts rate GPS a "hold" or worse, and almost 15% of its float is sold short. At the retail stock's average daily trading levels, it would take more than one week to cover these positions.

This negativity shouldn't come as a huge surprise, considering Gap Inc's (NYSE:GPS) underperformance. While the shares attempted to come back earlier this year, advances stalled near the round $30 level, and today's bearish gap has the stock back in the red on a year-to-date basis. Taking an even further step back, GPS has dropped over 43% year-over-year.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

 

You Don’t Need 25 Alerts -- You Need ONE You Can Trust!

That’s the idea behind Trade of the Week, Schaeffer’s newest trade alert.

Every Monday morning before the opening bell, you’ll receive a single, expertly researched trade recommendation -- built from the same proprietary research we’ve been using for over four decades.

It’s not just a signal.

It’s a plan designed for traders who are tired of jumping from alert to alert without ever finding their edge.

No juggling alerts. No switching directions mid-week. Just one clear, expertly researched trade idea -- delivered before the market even opens.

👉 JOIN RIGHT NOW FOR JUST $1 TO GET THE NEXT TRADE!