eHealth, Inc. (EHTH) Swoon Rewards Bearish Bettors

eHealth, Inc. (EHTH) is on pace for its worst single-session loss ever

Jan 15, 2015 at 10:36 AM
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eHealth, Inc. (NASDAQ:EHTH) has shed more than half of its value this morning -- putting the stock on pace for its worst day ever -- after last night forecasting an unexpected 2014 adjusted loss and receiving a price-target cut to $8 from $12 (along with a reaffirmed "sell" rating) at Citigroup. In fact, the stock earlier touched a six-year low of $9.31, and was last seen at $9.70. While shareholders can't be happy, a number of options traders likely are.

Digging deeper, EHTH boasts a Schaeffer's put/call open interest ratio (SOIR) of 2.24, which ranks in the 78th percentile of its annual range. In other words, short-term traders have shown a distinct preference for puts over calls, among options expiring in the next three months.

Short sellers have also been active on EHTH. While short interest dropped 21.2% during the most recent reporting period, 8.2% of the equity's float is still sold short, which would take roughly one week to buy back, at typical daily trading volumes.

These bearish bettors could be poised for additional gains if the brokerage bunch follows in the steps of Citigroup. Despite eHealth, Inc.'s (NASDAQ:EHTH) 84.4% year-over-year deficit, 30% of covering analysts still sport "strong buy" ratings. Also, the stock's consensus 12-month price target of $25.25 represents a premium of roughly 160% to the current perch. In other words, additional downgrades and/or price-target reductions are a possibility.

Daily Chart of EHTH since January 2014

 

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