2 Sinking Stocks Getting Blasted By Options Traders

SDC has been spiraling since its September IPO

Oct 14, 2019 at 3:16 PM
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The stock market is trading modestly lower this afternoon, as traders digest the latest U.S.-China trade news. Among individual names making notable moves are data analytics specialist Datadog Inc (NASDAQ:DDOG), e-commerce concern Pitney Bowes Inc. (NYSE:PBI), and teledentistry firm SmileDirectClub Inc (NASDAQ:SDC). Here's a quick roundup of what's moving the shares of DDOG, PBI, and SDC.

Datadog Drops on Mixed Analyst Attention

Datadog stock opened for its trading debut on Sept. 19 at $40.35 per share, well above its initial public offering (IPO) price of $27 per share. Today, the shares are down 6.2% at $33.47, after several analysts initiated coverage on the security. J.P. Morgan Securities and Needham set the highest bar, both starting DDOG with the equivalent of a "buy" rating and $45 price target. Jefferies, meanwhile, says the equity is a "hold," and set a $34 target price.

Options traders are getting in on the action, too, with more than 2,000 contracts on the tape -- four times what's typically seen at this point. The October 40 call is most active, and it looks like speculators may be selling to open the options. If this is the case, they expect DDOG to stay below the round $40 mark through expiration at the close this Friday, Oct. 18.

Pitney Bowes Erases Malware-Related Losses

Pitney Bowes stock was down 2.7% earlier on news the company was the victim of a malware attack, though the company issued a statement that no customer or employee data was impacted. At last check, the shares have swung up 0.8% to trade at $4.43.

More broadly speaking, the equity is off 25% year-to-date, and has been churning beneath the $4.50-$4.80 region since late May. Short sellers have been positioning for even more downside. The 35.28 million PBI shares currently controlled by shorts represent more than one-fifth of the stock's available float, or 12.5 times the average daily pace of trading.

SmileDirectClub Drops as AB 1519 Gets Signed Into Law

SmileDirectClub is selling off again, down 10% at $10.02, after California Governor Gavin Newsom signed Assembly Bill 1519 into law, which specifies standard practices for dentists providing orthodontics treatments to patients, including a requirement to review radiographs prior to treatment. In a subsequent statement, SDC said this law includes "undebated, clinically unsupported, and ill-advised policy changes," and creates "unnecessary hurdles and costs" to those seeking treatment.

SDC has now been cut in half since its Sept. 12 open at $20.55, and remains well below its IPO price of $23 per share. The stock's options have been in high demand during this sell-off today, with volume running at almost two times the average intraday pace today. The November 7.50 put is one of SDC's most active options, and it looks like new positions are being purchased here. By doing so, they're expecting SmileDirectClub stock to sink to a new record low south of $7.50 over the next several weeks.


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