American Airlines Wi-Fi Deal Whips Gogo Inc Stock

Gogo Inc (NASDAQ:GOGO) stock is short-sale restricted, after the company lost business to rival ViaSat, Inc. (NASDAQ:VSAT)

by Alex Eppstein

Published on Jun 3, 2016 at 10:50 AM

Gogo Inc (NASDAQ:GOGO) just inked a deal with American Airlines Group Inc (NASDAQ:AAL) to "continue to provide service on a meaningful portion of the American fleet." However, the airline also split its Wi-Fi order, giving half of its business to ViaSat, Inc. (NASDAQ:VSAT) due to complaints about GOGO's speed. As a result, GOGO stock has dropped 13.3% at $9.60 -- and landed on the short-sale restricted (SSR) list. While shareholders may be feeling the burn, options traders could find themselves in a good spot.

Why? Because put options have been bought to open at an accelerated rate in recent weeks. Specifically, GOGO's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has risen to 1.43 -- in the bearishly skewed 91st annual percentile. Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.71 ranks above 87% of readings from the prior year.

In today's trading, put volume has swelled to five times the expected intraday pace -- in part, due to the fact that short selling is not currently an option for bearish bettors. By the numbers, nearly 4,000 contracts are on the tape, compared to only 461 call options. The most active strike is the July 10 put, where it seems as if some traders are closing out of their now in-the-money options.

While we've already alluded to GOGO's SSR status, we should note that the stock has been heavily shorted in the weeks leading up to today. In fact, over 36% of the equity's float is sold short, representing more than two weeks' worth of trading, at the shares' typical daily trading levels.

On the charts, today's struggles are just more of the same for Gogo Inc (NASDAQ:GOGO). Year-to-date, the stock has tumbled roughly 46%, and its recent breakout attempt was stymied by its descending 100-day moving average.

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