Garmin Ltd., Angie's List Inc Torch Short Sellers With Strong Earnings

Post-earnings rallies are crushing Garmin Ltd. (NASDAQ:GRMN) and Angie's List Inc (NASDAQ:ANGI) short sellers

by Josh Selway

Published on Jul 27, 2016 at 11:31 AM

Shares of navigation expert Garmin Ltd. (NASDAQ:GRMN) and consumer review site Angie's List Inc (NASDAQ:ANGI) are soaring today, following impressive trips to the earnings confessional. While this is obviously great news for shareholders, many other traders are likely hurting as a result. Specifically, short interest is elevated on both GRMN and ANGI. Let's take a closer look at the stocks' post-earnings rallies. 

GRMN is trading 11.3% higher at $51.65, earlier hitting an annual peak of $52. The company not only reported better-than-expected second-quarter earnings per share and revenue, but raised its full-year outlook for both measures, as well. Today's bull gap puts GRMN stock up almost 39% year-to-date, though this comes after the shares declined precipitously in 2015.

Interestingly, short interest has actually been trending lower on GRMN since early 2014. Nonetheless, the stock's short-interest ratio remains at an elevated 12.50 -- meaning it'd take well over two weeks for short sellers to cover their positions, at the stock's average daily volumes. Theoretically, this is more than enough sideline cash to sustain a short-squeeze situation. 

A quick peak at the options pits suggests traders were betting against Garmin Ltd. (NASDAQ:GRMN) ahead of earnings. The stock's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) jumped from 1.46 to 9.91 in the two weeks leading up to earnings, putting it in the 97th annual percentile. The most popular front-month option during this time period, going by open interest added, was the August 45 put, suggesting traders may have been looking for GRMN to fall below the strike before the contracts expire at the close on Friday, Aug. 19. 

Turning to ANGI, the stock is up 12.2% at $8.53, after the company reported a surprise quarterly profit. Although the shares have more than doubled over the past 12 months, they're still far removed from their annual high of $11.25 from back in November -- not to mention their record highs above $28 in July 2013. 

ANGI is similar to GRMN in the sense that, while short interest remains high, it has generally been moving lower over the past few years. With close to 8% of the stock's float sold short, though, it'd still take short sellers two weeks to cover their positions, going by ANGI's average daily volumes. 

As for Angie's List Inc (NASDAQ:ANGI) options traders, data indicates a heavy focus on puts -- at least among traders targeting contracts set to expire within three months. This is according to ANGI's Schaeffer's put/call open interest ratio (SOIR) of 5.13. Not only does this show that put open interest is five times that of call open interest among the front three-months' series of options, but it also sits just 10 percentage points from a 12-month high. In other words, this type of put-skew is very uncommon for ANGI options traders, relatively speaking.

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