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Although Qihoo 360 Technology Co Ltd (NYSE:QIHU) reached a new all-time high of $50.67 this morning, options traders remain bearishly skewed. In fact, put activity has surged to more than two times the intraday norm, with nearly 2,300 puts crossing the tape so far.
Roughly half of this activity has taken place at the July 45 strike, where almost 1,100 contracts have changed hands at a volume-weighted average price (VWAP) of $0.32. A hefty bulk of these contracts went off at the ask price, suggesting they were purchased, while data from the International Securities Exchange (ISE) confirms the initiation of long put positions.
In order for today's put buyers to profit, QIHU -- docked at $49.84 -- has to sail 10.4% south to land below the breakeven price of $44.68 (strike price less the VWAP) by the close on July 19, when front-month options expire. Such a trek is quite different from QIHU's current course to the north. In fact, throughout the past year, the stock has gained a jaw-dropping 195.8%. Not to mention, in the last three months alone, it has advanced 73%, and outperformed the broader S&P 500 Index (SPX) by 57.3 percentage points. With that being said, should QIHU continue on its present path, and remain above the 45 strike over the next two weeks, the most today's put buyers risk losing is the initial premium paid.
Stepping back, QIHU's Schaeffer's put/call open interest ratio (SOIR) of 1.51 ranks in the 64th percentile of its annual range. This means that put open interest among options expiring in three months or less is slightly heavier than usual, outnumbering call open interest by a margin of 3-to-2.
Still, speculators at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than two QIHU calls for every put during the last four weeks, resulting in a 20-day call/put volume ratio of 2.39.