Could Short Interest Be a Boon to These 3 Large-Caps?

Netflix, Inc. (NFLX), Activision Blizzard, Inc. (ATVI), and Under Armour Inc (UA) could each benefit from high levels of short interest

by Alex Eppstein

Published on Oct 20, 2015 at 2:34 PM

As discussed here recently, overall short interest on S&P 500 Index (SPX) components is flirting with levels not seen in five years. Below, you'll find a chart courtesy of Schaeffer's Quantitative Analyst Chris Prybal, which lays out the biggest year-to-date percentage increases in short interest among SPX components with a positive 2015 return (as of last night's close). Three names we'll highlight this afternoon are streaming content concern Netflix, Inc. (NASDAQ:NFLX), video game maker Activision Blizzard, Inc. (NASDAQ:ATVI), and athletic apparel designer Under Armour Inc (NYSE:UA).


NFLX is a technical powerhouse, more than doubling in 2015 to trade at $98.66. That hasn't kept short sellers from betting against it, though. Year-to-date, short interest on the equity has jumped 16.4%, and now makes up almost one-tenth of the total float, pointing to potential buying power on the sideline.

Short-term option traders, meanwhile, are put-focused toward Netflix, Inc., despite its outperformance. Specifically, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.34 indicates puts in the front three-months' series have been more popular than calls. Also, this SOIR registers in the top one-third of all comparable readings from the past year. Should shorts and option bears begin to hit the exits, NFLX could get a lift.

Short interest on ATVI spiked over 24% during the last two reporting periods, and year-to-date, it's up almost 163%. In fact, a lofty 18.1% of the stock's float is sold short, representing six days' worth of pent-up buying power, at average daily trading levels. Put buyers have also been betting against the stock, per its 10-day put/call volume ratio of 0.47 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- in the high 85th annual percentile.

These skeptics could be on pins and needles, though. Activision Blizzard, Inc. has rocketed 67% higher year-to-date at $33.67 -- just a chip-shot from last Friday's record peak of $34.31. A mass exodus of short sellers and/or bearish bettors could add fuel to the equity's fire.

UA has also been strong on the charts, tacking on over 47% this year to hover near $99.23. In recent sessions, the stock has been consolidating atop its 40-day trendline, and a bounce from here could put the pressure on short sellers.

Short interest on Under Armour Inc has spiked 42.3% in 2015 to comprise 8.8% of its float -- or four days' of potential purchasing power, at average volumes. Similarly, the equity's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.99 sits a mere 5 percentage points from an annual bearish peak. Should this pessimism unwind -- perhaps on a positive earnings surprise, with the company set to report this Thursday morning -- it could send UA even higher.

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