Stocks quoted in this article:
Last night after the market close, Gap (GPS - 26-3/4) bestowed upon Wall Street another guidance to lower earnings. The company now places its third-quarter net at between 20 and 22 cents per share, below the current consensus estimate of 23 cents. In addition, GPS reported that third-quarter same-store-sales (sales from stores open one year or longer) fell by eight percent, while October same-store-sales fell by two percent.
According to Schaeffer's Daily Sentiment, the Schaeffer's put/call open interest ratio (SOIR) for GPS stood at 0.62 on Wednesday. After yesterday's open interest translations, the reading has shown a persistence in its upward (or pessimistic) configuration to its current 0.65 reading. The SOIR ceased its downward trend just after the shares bottomed and has been rising (becoming more bearishly configured) as the shares persist in their upward move. There now exists the possibility that most of the "bad news" on the stock is on the table and a relief rally is in store.
The options battle seems to be around the 25 strike today, as 1,435 contracts have traded on the November 25 call versus 1,233 contracts on the November 25 put.
The stock has traded as high as 27-1/4 this morning and is attempting to declare victory over the peak front-month open interest November 25 call strike.