Were Box Inc (BOX) Short Sellers Bracing for a Post-Earnings Surge?

Cloud-storage stock Box Inc's (NYSE:BOX) earnings-induced upside may have short sellers on notice

Mar 10, 2016 at 11:08 AM
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Cloud-based storage stock Box Inc (NYSE:BOX) is higher after the company's fourth-quarter earnings beat expectations. More specifically, the shares are up 2.9% at $12.88 -- after initially jumping 16% out of the gate -- on pace to top their 30-week moving average for the first time in the trendline's seven-month lifetime. While option traders were showing a preference to long calls ahead of the event, short sellers were upping the bearish ante -- something that may be contributing to today's upside.

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows more than two calls have bought to open for every put during the past month. Additionally, call open interest more than triples put open interest among short-term contracts. This is according to BOX's Schaeffer's put/call open interest ratio (SOIR) of 0.28 -- in the 21st annual percentile.

With over one-third of BOX's float is sold short -- nearly 13 million shares -- short sellers may have been hedging their bets with long call options ahead of the company's earnings release. What's more, the stock could be the beneficiary of post-earning short squeeze. If you go by average daily volumes, it'd take bears over 13 sessions to buy back their bets. This is ample sideline cash to fuel a short-term rally for the stock. 

As for analysts, most are bullish on BOX. Nine brokerage firms track the shares, and six of them call the stock a "strong buy," while none have issued a "sell" rating. This optimism comes despite Box Inc's (NYSE:BOX) more than 48% drop from its all-time high of $24.73 on Jan. 23, 2015 -- its first day of being publicly traded on Wall Street. 

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