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Short-Term Bears Ante Up On Yelp Inc (YELP)

Amid technical struggles, Yelp Inc is being targeted by put buyers

by 4/2/2014 11:40 AM
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Option Brief: Yelp Inc (NYSE:YELP) put volume -- at double its intraday average -- has raced ahead of call volume at midday. Against this backdrop, the stock's 30-day at-the-money (ATM) implied volatility (IV) is 9.3% higher at 80%. This is even more impressive considering YELP's short-term ATM IV sat at just 51.7% two weeks ago.

Short-term contracts are in vogue today, with nine of the 10 most active strikes expiring within the next month. Leading the way is YELP's April 70 put, which has seen nearly 2,400 contracts cross the tape -- all at the ask price, suggesting they were bought. IV at the strike is on the rise, and volume outstrips open interest, collectively hinting at newly created bearish bets.

Shares of the business review website have struggled of late. Since hitting an all-time high of $101.75 in early March, the stock has plummeted 23.2%; at last check, the shares were off 2.6% at $78.13. Consequently, today's put buyers are anticipating continued losses for Yelp. Specifically, they foresee the equity sinking below $70 -- a level not breached on a daily closing basis since Jan. 3 -- by April options expiration. (Based on the company's longer-term gains, it's also possible that some of the traders are shareholders protecting themselves against further negative movement in YELP shares.)

With today's move lower, delta on the option has shifted to negative 0.17 (from 0.12), indicating a 17% chance of an in-the-money finish. No matter what happens, the most the Yelp Inc (NYSE:YELP) put buyers have on the line is the initial premium paid.


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