Foot Locker Stock Tripped Up by Downgrade

Put traders have been targeting FL despite its recent bounce

Deputy Editor
Jan 4, 2022 at 11:31 AM
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The shares of Foot Locker, Inc (NYSE:FL) are down 3.8% to trade at $43.07 at last check, after J.P. Morgan Securities downgraded the shoe retailer to "underweight" from "neutral,"  with a price-target cut to $42 from $60. The firm noted that exiting Covid-19 in 2022 is "proving to be more challenging than entering it" as the retail sector is hit with various struggles amid supply chain issues. 

Before today's drop, FL had been making its way higher since bouncing off annual lows at the $40 level in mid December. The shares are now up 10% year-over-year, but remain a ways off their May 18 annual high of $66.71. There could be more downgrades on the way, considering 13 of the 23 analysts in coverage still carry a "buy" or better rating on FL.

Options traders have been much more pessimistic than usual. This is per FL's 10-day put/call volume ratio of 1.22 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 96% of readings in its annual range. 

It's also worth noting that Foot Locker is seeing well-priced premiums. The stock's Schaeffer's Volatility Index (SVI) of 36% stands higher than just 10% of all other readings in its annual range, implying that options players are pricing in low volatility expectations at the moment. 

 

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