Short-Seller Swipe Sparks Bearish Frenzy at J2 Global Inc (JCOM)

J2 Global Inc (NASDAQ:JCOM) isn't taking Citron Research's short-seller report lying down

by Alex Eppstein

Published on Mar 11, 2016 at 10:08 AM
Updated on Jun 24, 2020 at 10:16 AM

Short seller Citron Research has been throwing around its weight in recent weeks, even taking a shot at Tesla Motors Inc (NASDAQ:TSLA). Yesterday, J2 Global Inc (NASDAQ:JCOM) was in the crosshairs, with Citron accusing the telecom firm of "dirty secrets." This morning, however, JCOM called the short-seller report "factually incorrect" and "wrongly critical" of its business practices.

JCOM's response has the stock up 1.7% in early trading at $57.87, just a day after it plummeted nearly 20% and hit an annual low of $55.43. And while shareholders might be welcoming the rebound, it looks like option traders have been rolling the dice on extended losses for the stock.

Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), we see traders have bought to open more than five puts for every call on lightly traded JCOM in the last 10 weeks. The resultant 50-day put/call volume ratio of 5.24 ranks in the bearish 85th percentile of its annual range.

Underscoring this preference for puts over calls is JCOM's Schaeffer's put/call open interest ratio (SOIR) of 2.84, which sits above 94% of comparable readings from the past year. This indicates, first, that put open interest nearly triples call open interest among options in the front three-months' series. Second, the SOIR's percentile rank shows short-term speculators are more put-skewed than normal, based on data from the last 12 months.

In fact, yesterday, put volume hit a 52-week peak, with 20,526 contracts traded. What's more, puts accounted for four-fifths of the total number of JCOM options traded. Seeing the biggest rise in open interest overnight was the stock's front-month March 6 put, where it looks like new positions were purchased.

Beyond the options pits, it's clear Citron Research isn't the only one shorting shares of J2 Global Inc (NASDAQ:JCOM). Although the stock was placed on the short-sale restricted list yesterday -- and remains on it today -- short interest jumped almost 28% during the past two reporting periods, and now accounts for close to one-tenth of the stock's float. At JCOM's typical daily trading levels, it would take nearly two weeks for short sellers to cover these bearish bets.

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