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Option Brief: Sirius XM Radio Inc (NASDAQ:SIRI) has seen a surge in bearish options activity today, with more than 6,100 puts switching hands so far -- a 42% mark-up over the norm. By comparison, around 2,800 calls have been exchanged. Digging deeper into the data, it appears that one group of speculators is forecasting a decline for the satellite radio darling over the next several sessions.
The clear front-runner has been the weekly 11/29 3.50 strike, where 5,050 puts have crossed the tape -- the vast majority of them at the ask price, signaling buyer-driven volume. Since this strike holds open interest of just 400 contracts, and implied volatility has surged 19.3 percentage points, it's safe to assume that fresh long positions have been initiated here.
By purchasing the puts to open, the traders are hoping SIRI will backpedal south of the $3.50 mark by the close on Nov. 29, when these weekly options expire. This denotes a drop of 4.4% from the stock's present perch at $3.66, as well as territory not explored since early July. The delta for this put sits at negative 0.19, implying it has a nearly 1-in-5 chance of being in the money at expiration. However, even if the shares remain atop the strike price through next Friday's closing bell, the speculators will only risk forfeiting the initial cash outlay.
Technically speaking, Sirius XM Radio Inc (NASDAQ:SIRI) has advanced roughly 27% so far this year, but has trailed the broader S&P 500 Index (SPX) by about 12.5 percentage points over the most recent two-month period. What's more, the stock shed 7.4% between Oct. 23 and Oct. 25 alone -- a time frame that encompassed the firm's most recent turn in the earnings confessional.