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Clearwire Corporation (NASDAQ:CLWR) was heavily targeted by put players on Wednesday, with options players betting on yet another earnings miss for the wireless provider. Around 19,000 puts crossed the tape yesterday, compared to roughly 1,200 calls. CLWR's June 3 put emerged as the most active strike by far, where the majority of the 17,756 contracts traded went off at the ask price. Implied volatility rose 2.7 percentage points, and open interest added 14,930 positions overnight, signaling buy-to-open put activity.
These out-of-the-money puts were purchased for a volume-weighted average price (VWAP) of $0.10. In other words, traders will begin to profit with each step south of $2.90 (strike price less VWAP) Clearwire takes through the close on June 21, which is when back-month options expire. This breakeven mark resides 11.9% below the stock's current price of $3.29. Risk, meanwhile, is limited to the initial cash outlay. It seems that options traders were willing to pay a bit more for their bearish bets, as implied volatility at the strike is inflated relative to the stock's 40-day historical (realized) volatility (39% vs. 18.1%), meaning premium is relatively expensive at the moment.
Wednesday's penchant for puts is just business as usual for Clearwire option traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.55 ranks higher than 97% of similar readings taken over the past 52 weeks. In other words, puts have been bought to open with more rapidity just 3% of the time within the last year.
Even more telling is the stock's Schaeffer's put/call open interest ratio (SOIR) of 2.68. Not only does this show that put open interest nearly triples call open interest among options expiring in three months or less, but it ranks in the highest percentile reading of its annual range. Simply stated, short-term speculators are more put-heavy now than at any other time within the past year.
This put-skewed trend is a bit puzzling when looking at Clearwire Corporation's technical backdrop. Since bottoming out at an all-time low of $0.83 on July 24, the shares have nearly quadrupled in value. Plus, the stock has found a friend on the charts in the form of its 50-day moving average. This trendline has only allowed one daily close south of it going back to mid-October. In light of this, the recent rush toward puts could simply represent shareholders picking up some options-related insurance ahead of the company's turn in the earnings confessional.
Speaking of earnings, Clearwire Corporation (NASDAQ:CLWR) is scheduled to unveil its quarterly results after tonight's close. The company has fallen short of analysts' bottom-line expectations in two of the past four quarters. For CLWR's fiscal second quarter, Wall Street is calling for a loss of 25 cents per share.
Also on the fundamental front, the company has scheduled a special meeting on May 21 for shareholders to vote on the proposed merger with Sprint Nextel Corporation (NYSE:S). S -- which currently owns a more than 50% stake in CLWR -- has offered to buy the remaining shares for $2.97 apiece. This upcoming event may also be prompting some of the recent put activity.