Neonode, Inc (NEON) Skeptics Cheer Bear Gap

Neonode, Inc (NASDAQ:NEON) is getting hammered on downbeat revenue guidance and secondary offering pricing

Oct 7, 2015 at 10:47 AM
facebook twitter linkedin

Neonode, Inc (NASDAQ:NEON) has landed on the short-sale restricted list, after gapping lower on the tech firm's lackluster revenue guidance. Also weighing on the shares -- down 17.9% to $2.16 -- is the company's secondary offering pricing of $1.90, which represents a deep discount to yesterday's close at $2.63. While shareholders are getting burned on the news, short sellers and option traders are in a better spot.

Diving right in, over one-quarter of NEON's float is sold short. At the stock's average daily trading levels, it would take an astounding seven weeks to buy back these shorted shares. In fact, short interest is at its highest level since early June.

On the options front, call writing has been a popular strategy of late. Just yesterday, in fact, nearly 4,700 contracts were sold to open at NEON's out-of-the-money November 3 call. These sellers will profit, so long as the stock closes below $3 at back-month expiration, the evening of Friday, Nov. 20. Delta on the call has dropped to 0.21 from 0.36 last night, giving the option a slim 1-in-5 chance of being in the money at expiration.

At the same time, Neonode, Inc's (NASDAQ:NEON) implied volatility has surged 16.8 percentage points to 93%. In other words, it would now cost more to close the positions than it did to open them. Specifically, yesterday's volume-weighted average price (VWAP) for the call sellers was 12.5 cents, but the ask price this morning is 15 cents.

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 



Special Offers from Schaeffer's Trading Partners