FUTU is a downgrade risk going forward
Hong Kong-based fintech Futu Holdings Ltd (NASDAQ:FUTU) is the worst stock on the Nasdaq today, down 31% to trade at $85.50 at last look. The company is staring down a 1.85 billion penalty by China securities regulators over unlicensed businesses. To add insult to injury, J.P. Morgan Securities chipped in a downgrade to "neutral" from "overweight", along with a price-target cut to $87 from $300.
This is poised to be FUTU's worst single-session drop on record. Prior to today's selloff, the shares had carved a channel of lower highs since their Nov. 3 peak at $202.52. Now, the stock has breached its year-over-year breakeven level.
More downgrades could be on the way, considering 11 of the 12 brokerages in coverage maintain "buy" ratings, with not a single "sell" on the books. The consensus 12-month price target of $229.96 is a 193% premium to its current perch.
Puts rule the roost in the options pits, with a 10-day put/call volume ratio of 8.53 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 100th percentile of its annual range.
Today, options volume is running at seven times its usual daily volume, with 64,000 puts crossing the tape already. The weekly 5.22 72.45-strike put is the most popular, while new positions are being bought to open at the weekly 6/5 115-strike put.