Sears Holdings Corporation (SHLD) Pestered by Pessimists

Options traders have rarely been as bearish toward Sears Holdings Corp (SHLD) as they are now

by Alex Eppstein

Published on May 6, 2015 at 2:14 PM

Sears Holdings Corp (NASDAQ:SHLD) has officially stopped carrying Kardashian Kollection merchandise, after the product line failed to live up to expectations for over three years. Speaking of expectations, sentiment on SHLD is extremely bearish right now -- in the options pits and beyond.

During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the retailer has seen nearly 13 puts bought to open for every call. The resultant put/call volume ratio of 12.67 ranks just 1 percentage point shy of a 12-month peak, meaning traders have rarely bought to open SHLD puts over calls at a faster pace.

Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) is 4.27, with put open interest more than quadrupling call open interest among options with a shelf-life of three months or less. This SOIR is actually higher than 84% of comparable readings taken in the past year.

Elsewhere, over 10 million SHLD shares are sold short. At the stock's average trading levels, it would take almost three weeks to repurchase these shorted shares.

This negativity is fairly surprising, considering Sears Holdings Corp's (NASDAQ:SHLD) technical prowess. The stock has advanced nearly 25% year-to-date to trade at $41.19, but is off 0.3% this afternoon -- following news the company's rent payments will increase by more than $150 million due to the creation of a real estate investment trust (REIT).

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