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Live Nation Entertainment, Inc. (NYSE:LYV) -- currently docked at $13.95 -- has climbed 31.73% during the past three months, in addition to outperforming the overall S&P 500 Index (SPX) by roughly 24%. On top of that, the stock reached a new three-year peak of $14.15 yesterday. Even so, the majority of traders remain bearish toward LYV. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) of 15.60 indicates that put open interest on options with a shelf-life of three months or less outweighs call open interest by a margin of nearly 16-to-1. This ratio ranks in the 87th percentile of its annual range, signifying heavier-than-usual put activity.
Likewise, LYV's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day put/call volume ratio stands at 4.77, meaning speculators have bought to open almost five puts for every call during the past two weeks. On the same note, 6.8% of the stock's float has been sold short, further proving the higher-than-usual bearish sentiment toward LYV.
In today's options pit for LYV, puts have changed hands at a rate 149 times the intraday norm*. So far, 19,000 puts have crossed the tape, compared to just 76 calls. The speculators have shown particular interest in LYV's June 13 put, where almost 15,700 contracts (more than 80% of the day's put volume) have traded. This activity includes two blocks of 4,360 and 4,359 contracts, which have been exchanged at a volume-weighted average price (VWAP) of $0.42. The contracts traded closer to the ask price, implied volatility is on the rise, and the option's volume exceeds its open interest, collectively pointing to buy-to-open activity.
In order to profit from the play, the put buyers anticipate LYV to fall below the breakeven price of $12.58 (strike price less the VWAP) by June 21, when back-month options expire. However, if the stock remains above the 13 strike, the put buyers risk losing the initial premium paid per contract.
Editorial note: This was corrected to read "149 times" from the originally cited 80%. We apologize for any confusion this may have caused.