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The shares of Zagg Inc (NASDAQ:ZAGG - 8.80) have made headway since rebounding off the $7 level in mid-to-late August, but it seems some options speculators are wagering on a short-term pullback for the stock. In afternoon trading, the electronics accessories maker has seen around 4,250 puts cross the tape -- about 18 times its average intraday put volume, and more than four times the number of ZAGG calls exchanged.
Garnering the most attention have been the October 6 and October 8 puts, which have seen around 1,200 and 1,900 contracts traded, respectively. Volume has surpassed open interest at both strikes, and the majority of the newly front-month puts have changed hands at the ask price, hinting at buy-to-open action.
By buying the puts to open, the traders are expecting ZAGG to backpedal within the next few weeks. More specifically, the volume-weighted average price (VWAP) of the 6-strike puts is $0.63, indicating a breakeven level of $5.37 (strike minus premium paid). Meanwhile, the 8-strike puts traded at a VWAP of $0.30, meaning the buyers will profit if ZAGG breaches the $7.70 level by October options expiration.
However, today's affinity for long puts runs counter to the growing trend seen on the major exchanges. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day call/put volume ratio of 6.82, indicating that traders have bought to open nearly seven calls for every put during the past two weeks. Plus, this ratio sits in the 81st percentile of its annual range, implying that option buyers have initiated bullish bets over bearish at a quicker-than-usual step.
In the same vein, the stock's Schaeffer's put/call open interest ratio (SOIR) rests at 0.63, indicating that calls are significantly more popular than puts among options expiring within three months. Furthermore, this ratio stands higher than just 27% of all other readings of the past year, suggesting near-term traders are more call-heavy than usual right now.
While the shares were last seen around 0.6% higher, today's option bears could be betting on the $9 area to smack ZAGG lower. This region marks the site of the stock's bearish gap from mid-July, and has since translated into a speed bump on the charts.
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