Stocks quoted in this article:
Call volume more than doubled put volume on Deckers Outdoor Corp (NASDAQ:DECK - 34.57) on Thursday, with short-term speculators honing in on the stock's December-dated series of options. Of the roughly 7,250 calls that crossed the tape, around 1,650 changed hands at the December 37.5 strike. The majority of these went off at the ask price, implied volatility surged 14.2 percentage points, and open interest rose overnight -- all indications of buy-to-open activity.
By purchasing these out-of-the-money calls for a volume-weighted average price (VWAP) of $0.10, traders need DECK to rise above the $37.60 mark (the strike plus the average net debit paid) by today's close, at which point the options will expire. This breakeven level is an 8.8% premium to DECK's current perch.
Widening the scope, yesterday's campaign toward calls is a continuation of the withstanding trend seen in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 169 calls for every 100 puts throughout the past 50 sessions. This call/put volume ratio of 1.69 ranks higher than 70% of other such readings taken in the last year, indicating a heavier-than-usual preference for long calls over puts in recent months.
Echoing this sentiment is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.56. Not only does this show that call open interest nearly doubles put open interest among options with a three-month shelf-life or less, but it ranks in the 23rd percentile of its annual range. Simply put, short-term speculators are more call-heavy than usual toward DECK.
Technically, DECK has had a dismal year on the charts, with the shares surrendering more than 54% of their value in 2012. However, the stock has bounced more than 21% off its year-to-date low of $28.53, which it tagged on Oct. 31. This rebound suggests the recent rush toward calls could be short sellers picking up hedges on their bearish bets. Short interest rose 1.1% in the latest reporting period, and now accounts for nearly half of DECK's available float.
This glut of short sellers won't be disappointed with today's price action, though. At last check, the stock was down 1% in early trading to hover near $34.57. Should DECK fail to topple the aforementioned breakeven mark by the end of today's session, the most Thursday's call buyers stand to lose is the initial premium paid.