Options Traders Circle Wayfair Stock After Top-Line Beat

Increased online shopping trends have boosted the security

Assistant Editor
Nov 3, 2020 at 10:12 AM
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Wayfair Inc (NASDAQ:W) stepped in to the earnings confessional this morning, reporting third quarter earnings and revenue that finished above Wall Street's estimates. The company benefited in large part from strong demand and a shift to online shopping by consumers during the pandemic. Additionally, membership grew by just over 50% from a year ago.

At last check W was flat, last seen trading at $254.65, despite trading as high as $266.94 and as low as $247.07 in just the first hour of trading. The shares remain stuck under their 100-day moving average though, a trendline breached last week for the first time since April. Longer term, Wayfair stock boasts a more-than-impressive 182.9% rise in 2020.

A short squeeze could provide additional tailwinds for the security. Short interest rose 7.5% during the last reporting period, and the 14.24 million shares sold short  make up an eyebrow raising 22.2% of the stock's available float. In simpler terms, it would take just over five days to buy back these bearish bets, at Wayfair stock's average pace of daily trading.

Meanwhile, options players could be using calls to hedge their bets against any unexpected upside, as the security sports a 50-day call/put volume ratio of 1.27 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than all but 3% of readings in its annual range, suggesting a heavier-than-usual appetite for long calls of late.

Today's options pits are flashing ample activity on both sides of the fence. In the first hour of trading, over 5,500 calls and just over 3,000 puts have already exchanged hands -- five times the intraday average and volume pacing in the 99th percentile of the past 12 months. Most popular today is the weekly 11/6 270-strike call, followed by the 300-strike call from the same series, with new positions being opened at the former. Positions are also being opened at the weekly 11/6 280-strike call.

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