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Option Brief: RadioShack Corporation (NYSE:RSH) is having a tumultuous week. Since closing at $2.72 on Monday, the stock has tumbled 26% to land on the hard-to-borrow list. With short selling a distant possibility, speculators have turned to put options to wager on even more downside in the shares.
So far today, roughly 38,000 put contracts have changed hands, which is 10 times greater than typical intraday put volume. For comparison's sake, fewer than 7,000 calls have changed hands. In fact, nine of today's top 10 most active strikes are on the put side of the fence.
Three strikes in particular are garnering their fair share of attention, and make up about half of today's put volume. Implied volatility is on the rise at all three strikes, and the majority of the action is trading at the ask price, suggesting buy-to-open orders are being placed. Short-term bears are focused on the March 1.50 put, where nearly 7,700 contracts have traded. Currently, the options market thinks an in-the-money finish on March 21 (expiration Friday) is a long shot, as delta stands at just negative 0.13.
Also active are the April 2.50 and October 2 puts, where volume handily exceeds existing open interest. These put buyers are hoping RSH continues to struggle in the weeks or months ahead, as RSH dipped to $2.00 today -- its lowest point since December 2012. Note that because RSH is trading so close to zero, put buyers' profit potential is severely limited (as a stock cannot trade in negative territory).
Tuesday morning, RadioShack Corporation (NYSE:RSH) announced a wider-than-expected drop in earnings per share and revenue. The chain also announced plans to shutter roughly one-fifth of its 5,200 locations.