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Puts have been the options of choice on Lululemon Athletica inc. (NASDAQ:LULU) lately, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock sports a 10-day put/call volume ratio of 1.22, indicating puts bought to open have outpaced their bullish counterparts during the past two weeks. This ratio ranks in the 66th annual percentile, conveying traders have been scooping up puts over calls at an accelerated clip.
Tuesday was no exception, as roughly 22,000 puts crossed the tape during the course of the session. This was almost quadruple the norm, and about double the number of calls exchanged. Also of note, the security's 30-day, at-the-money implied volatility closed at 47.9%, up from the previous day's figure of 44.7%.
Garnering notable attention was the weekly 8/23 70-strike put, where 2,859 contracts changed hands at a volume-weighted average price (VWAP) of $1.02. Meanwhile, the majority of the puts traded at the ask price, and open interest climbed by 2,615 contracts overnight -- confirming our theory of buy-to-open activity.
In other words, these speculators will profit if LULU retreats below $68.98 (strike price less the VWAP) by Friday's closing bell. This breakeven rail is just 1.6% south of the security's present perch at $70.13. Still, even if the shares remain atop the $70 mark between now and week's end, the most yesterday's put buyers risk forking over is the initial premium paid.
As alluded to earlier, yesterday's fixation on puts is just more of the same for the yoga apparel enthusiast. Schaeffer's put/call open interest ratio (SOIR) for LULU checks in at 1.42, with puts comfortably outstripping calls among options with a shelf-life of three months or less. In fact, this ratio is just 8 percentage points away from a 12-month acme, confirming near-term traders have rarely been more put-focused toward the stock during the past year.
This pessimism toward Lululemon Athletica inc. (NASDAQ:LULU) is understandable, considering the shares have shed around 8% year-to-date, and have lagged the broader S&P 500 Index (SPX) by over 11 percentage points during the past three months. Although the stock has been trying to recover from a steep bearish gap on June 11 -- when Christine Day announced plans to step down as CEO following the now infamous see-through pants drama -- the equity is still down 15% from its record high of $82.50, which was achieved the day prior.