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Bears Out On Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA) Earnings

Post-earnings skeptics have piled into ULTA's options pits

by 12/6/2013 2:43 PM
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Option Brief: Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA), down 21.1% to trade at $93.15, has been swamped by bearish activity today, on the heels of last night's disappointing quarterly report. With ULTA currently on the short sale restricted list, many of today's disheartened speculators have made their way to the options pits, picking up puts at a rate of close to 25 times the typical intraday norm.

Among the top most active options for ULTA today is the December 95 put, where about 1,300 contracts have changed hands. The majority of the contracts traded on the ask side, and volume exceeds current open interest, suggesting that fresh bearish bets have been opened here. While these puts are currently in the money, today's skeptics will not turn a profit until ULTA lands below the breakeven rail of $91.41 (strike price less the volume-weighted average price of $3.59).

Today's heavy put activity represents a change of pace from the previous two weeks leading into ULTA's quarterly announcement. The equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.15 ranks in the 75th percentile of its annual range, indicating option traders have bought to open ULTA calls over puts at an accelerated clip in recent sessions.

As touched upon earlier, Ulta Salon, Cosmetics & Fragrance, Inc.'s (NASDAQ:ULTA) third-quarter earnings results and current-quarter forecast fell short of analysts' projections. As such, the equity received bearish brokerage notes from the likes of Jefferies, Piper Jaffray, Sterne Agee, and Credit Suisse. Meanwhile, the shares' subsequent plunge took ULTA 8.2% below its year-ago value.


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