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SodaStream Attracts Bearish Bettors to the Trading Table

Speculators eye SODA's front-month series of puts

by 2/1/2013 1:53 PM
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SodaStream International Ltd (NASDAQ:SODA - 48.25) is caught in the bearish trading crosshairs today, as north of 8,100 puts have crossed the tape so far -- more than tripling the stock's anticipated intraday put volume. A number of pessimistic bettors have set their sights on the front-month series of options -- the February 45 put in particular, where nearly 3,600 contracts have been exchanged.

A healthy portion of these out-of-the-money puts traded at the ask price, pointing to buyer-driven activity. Since today's volume surpasses open interest levels at this strike -- coupled with the fact that implied volatility has ticked slightly higher during the course of the session -- it's very likely that new positions are being initiated here. By purchasing these puts to open, speculators are expecting SODA to retreat below $43.87 (strike price less the volume-weighted average price [VWAP] of $1.13) by the close on Feb. 15, which is when these front-month options expire. This reflects a 9% drop from the equity's current price.

Today's put-heavy activity notwithstanding, calls have been the options of choice on SODA for the past few months. In fact, the security's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 5.02, indicating traders have bought to open more than 500 calls for every 100 puts during the last 10 weeks. This ratio registers higher than 87% of similar readings taken within the past 12 months, meaning speculators have been placing bullish bets over bearish at a faster-than-usual pace.

From a technical standpoint, the home beverage maker is off to a promising start in 2013, having advanced more than 7% year-to-date. The stock has also outperformed the broader S&P 500 Index (SPX) by roughly 31 percentage points during the past three months. What's more, the shares tagged a 52-week high of $53.99 on Jan. 25. Time will tell if SODA will sink low enough to reward today's bears prior to front-month expiration.


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