Pre-Earnings Options Traders Eye a Finish Line Stock Slide

Options traders have been placing bearish bets over bullish on Finish Line stock

Mar 23, 2017 at 12:13 PM
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Finish Line stock could move sharply tomorrow, after the footwear retailer reports earnings ahead of the opening bell. The last three post-earnings sessions have seen the shares swing wildly, with losses of 8.7% and 5.2% last December and September, respectively, as well as a 21.8% jump after the company's June report. Ahead of earnings, FINL stock is sharply higher, while options traders and others on Wall Street are displaying bearish tendencies.

Starting on the charts, the shares have surged 5.7% today, last seen at $16.29. Since topping out at $24.52 in early September, though, FINL stock has dropped over 33% of its value. Yesterday, in fact, the shares touched a six-year low of $15.18.

Perhaps these longer-term technical struggles -- and possibly yesterday's Nike earnings reaction -- explain why FINL options traders have shown an unusual preference for puts. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.89 ranks in the 88th percentile of its annual range, suggesting a smaller-than-normal call-skew among short-term speculators. Narrowing the scope down to near-the-money options in the April series, the shares sport a front-month gamma-weighted SOIR of 1.98, with puts roughly doubling calls. Last but not least, FINL put open interest ranks in the high 86th percentile of its annual range.

As alluded to, options traders are far from the only ones skeptical toward FINL stock. Thirteen of 15 analysts rate the shares a tepid "hold." Plus, despite short interest cratering nearly 25% over the past two reporting periods, a lofty 15.7% of the equity's float remains dedicated to these bearish bets. At FINL's average trading rate, it would take over a week for shorts to cover these positions.

All that to say, if Finish Line manages to rally after an upbeat earnings report, bearish options traders, short sellers, and analysts could all get burned. On the other hand, if earnings spark another sell-off, FINL stock could head to even lower lows.

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