Yelp Stock Lower on KeyBanc Downgrade

Options traders have been more bearish than usual in recent weeks

Managing Editor
Jun 6, 2018 at 10:19 AM
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Business review concern Yelp Inc (NYSE:YELP) is lower in early trading, after the stock was downgraded at KeyBanc to "sector weight" from "overweight" this morning, with the brokerage firm citing soft customer engagement. In response, YELP is down 2.3% at $43.10 in early trading.

Despite boasting a 45% year-over-year lead, Yelp stock has pulled back sharply since its mid-May peak north of $48 -- due in part to a May 11 earnings-related bear gap. The stock is now at risk of closing below its 200-day moving average for the eight time in nine sessions, a trendline that helped cushion drops in February and March.

Against this backdrop, options trader have been unusually bearish in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows YELP's 10-day put/call volume ratio at 2.05, ranking in the 94th annual percentile. This lofty ratio suggests that puts have been purchased over calls at a faster-than-usual clip during the past two weeks. 

Those targeting short-term options are in luck, too. YELP currently sports a Schaeffer's Volatility Index (SVI) of 31%, which ranks in the 6th percentile of its annual range. This suggests that near-term options are pricing in relatively low volatility expectations at the moment, which could help maximize the benefit of leverage for premium buyers.

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