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).


151020shortinterest

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.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earning announcements before it's too late!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Look Who's Going Bankrupt Next in America
Porter Stansberry is making a concerning prediction.
Silver Lining for Struggling Ulta Beauty Stock
Historically, ULTA is one of the best stocks to own in the second quarter
3M Ramps Up Face Mask Production on White House Order, Stock Slips
President Trump said he would invoked the Defense Production Act against 3M in a tweet late on Thursday
Look Who's Going Bankrupt Next in America
Porter Stansberry is making a concerning prediction.