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Option Clips: Sprint Corporation, Gogo Inc, and Tilly's Inc

Reviewing notable options activity on Sprint Corporation, Gogo Inc, and Tilly's Inc

by 5/29/2014 1:23 PM
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Three names seeing notable option activity today amid developing news and/or unusual price action are telecom concern Sprint Corporation (NYSE:S), in-flight connectivity provider Gogo Inc (NASDAQ:GOGO), and retailer Tilly's Inc (NYSE:TLYS). Here's a look at how today's option traders have been placing their bets on these three names.

  • Sprint Corporation (NYSE:S) is up 1.7% at $9.36, amid reports that Deutsche Telekom AG -- majority owner of T-Mobile US Inc (NYSE:TMUS) -- has signed off on a plan to sell TMUS to Softbank Corp, majority owner of S. However, options traders are picking up S puts at a faster-than-usual clip today, with intraday volume running at a 58% mark-up to the norm. Short-term options, in particular, are in favor, as the equity's 30-day at-the-money implied volatility (IV) is up 4.3% at 51.2%. Most active is the June 8 put, where more than 8,500 contracts have traded, primarily on the ask side. What's more, IV at the strike has jumped 3.2 percentage points, underscoring our theory of buy-to-open activity. By purchasing the puts to open, the buyers are either expecting S to slide south of $8 within the next three weeks, or are picking up options "insurance" to protect their shares against a short-term downturn.

  • With its annual shareholder meeting currently underway, Gogo Inc (NASDAQ:GOGO) is 5.3% higher at $18.61. The stock has advanced more than 38% so far in May, and has outperformed the broader S&P 500 Index (SPX) by 29 percentage points during the past month. As such, options players today are rolling the dice on short-term support at the $18 marker. Intraday put volume is running at two times the average, and sell-to-open activity has been detected at the June 18 put. Specifically, a block of 2,000 contracts traded at the bid price of $0.95 each, and volume has exceeded open interest at the strike. The best-case scenario for the options seller is for GOGO to remain north of $18 through the close on Friday, June 20, at which point he can pocket the initial premium received from the sale.

  • Finally, Tilly's Inc (NYSE:TLYS) is 16.8% lower at $8.80 -- and earlier touched a new record low of $7.95 -- after the company offered lackluster earnings and guidance. As such, the stock has landed on the short-sale restricted (SSR) list, and was slapped with no fewer than five price-target cuts today. Overall option volume is running at 27 times the intraday norm, though it remains arguably light on an absolute basis; fewer than 150 contracts have been exchanged on either side of the tape, with calls and puts trading near parity. Although the stock is on the SSR list, plenty of bears were already betting on TLYS to tumble. Short interest accounts for 7.2% of TLYS' total float, representing nearly three weeks' worth of pent-up buying demand, at the equity's average daily trading volume.
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