Making Technical Sense of Lyft Stock Post-Earnings

Options traders could be using calls to hedge

Digital Content Manager
Nov 11, 2020 at 3:55 PM
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The shares of LYFT Inc (NYSE:LYFT) are trading around $36.21 at last check, after the ridesharing giant reported third-quarter losses of $0.89 per share -- notably better than Wall Street's estimated losses of $0.91 per share -- as well as a revenue beat, even if the latter is down 48% from a year prior. The company attributed the upbeat results to a slow recovery in rides, and added that it is looking to tap into the food-delivery market. As a result, the stock earned no less than 15 price-target hikes this morning, including one from Wedbush to $38 from $47. It also received a price-target cut, though, from RBC to $46 from $48.

Digging deeper, Lyft stock has experienced its fair share of volatility over the past few months. Shares more than doubled during a June rally off their March 18 all-time-low of $14.56. Earlier this month, the shares cleared their 80-day moving average, a trendline that had been keeping a tight lid on the security since July. However, it's also worth noting that the stock sports a 14-day Relative Strength Index (RSI) of 72, which sits on "oversold" territory, meaning the stock could be due for a short-term breather.

LYFT 80 Day

Analysts were already majorly optimistic toward the equity coming into today. Of the 24 in question, 16 carried a "buy" or better rating, while eight carried a tepid "hold." Echoing this is the 12-month consensus target price of $42.80, which is an 18.8% premium to current levels. This puts LYFT at risk of downgrades should the stock stall out again.

That upbeat sentiment is reflected in the options pits, where calls are popular. This is per the security's 50-day call/put volume ratio of 4.71 that sits in the 97th annual percentile at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This suggests calls are being picked up at a faster-than-usual clip. However, given 11% of LYFT's total available float is sold short, it's possible some of these calls could be shorts hedging against any unexpected upside.

Drilling down to today's trading, 54,000 puts have crossed the tape, which is twice the average intraday amount. Though the 11/13 40-strike call is still  the most popular, the 35-strike put in the same weekly series is not far behind, with new positions being opened at the former.

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