Stocks quoted in this article:
Yelp Inc (NYSE:YELP) attracted an unusually high number of bearish bettors on Friday, as nearly 10,000 puts changed hands during the course of the session. This was about double the security's average single-session volume put, and around 1,100 more than the number of calls traded. Taking a closer look at the data, it appears that a handful of speculators are counting on the Internet review forum to backpedal over the next three weeks.
Garnering notable attention was the weekly 10/4 62.50-strike put, which saw 2,053 contracts trade at a volume-weighted average price (VWAP) of $3.39. Since the majority of the puts were exchanged at the ask, and open interest surged by 2,001 contracts over the weekend, it can be assumed that new positions were added here. Data from the International Securities Exchange (ISE) also corroborates this theory of buy-to-open activity.
In other words, Friday's put players will profit with each step YELP takes below the breakeven rail of $59.11 (strike price less the VWAP) between now and the close on Oct. 4, when these weekly options expire. This represents expected downside of about 7.5% from the stock's current perch at $63.88. Factoring in today's gain of about 1.5%, the delta for the option is docked at negative 0.41 -- versus Friday's closing figure of negative 0.45 -- meaning the put has a 41% chance of finishing in the money.
However, should the shares remain north of the strike price over the option's lifetime, the most the aforementioned put buyers stand to lose is the initial premium paid. Additionally, the stock's Schaeffer's Volatility Index (SVI) of 58% ranks lower than 70% of similar readings taken during the past 12 months, implying YELP's near-term options are relatively cheap right now.
This skepticism toward Yelp Inc (NYSE:YELP) seems unwarranted, considering the stock has more than tripled in value year-to-date, and has outperformed the broader S&P 500 Index (SPX) by almost 91 percentage points during the most recent three-month time frame. In fact, the equity touched a new all-time high of $66.24 just last week.
Option Briefs offer a concise look at recent notable trading activity. For more in-depth coverage of securities from an Expectational Analysis®
perspective, please visit our Trading Floor Blog section.