How Traders are Reacting to the Stratasys, Ltd. (SSYS) Sell-Off

Stratasys, Ltd. saw pre-earnings call and put selling yesterday


Published on Nov 5, 2014 at 9:59 AM
Updated on Apr 20, 2015 at 5:32 PM

Stratasys, Ltd. (NASDAQ:SSYS) has plunged 9.5% out of the gate to trade at $109.71 following this morning's earnings report. This bold move -- which isn't totally unexpected -- is likely being met with cheers and jeers in the 3-D printing stock's options pits, as call and put writers were both active yesterday. In fact, Tuesday's overall volume more than doubled the expected daily amount.

Diving right in, SSYS' most active strike yesterday was the weekly 11/7 130 call, where the majority of the 800 contracts traded crossed at the bid price. Open interest popped overnight, as well, making it safe to assume the positions were sold to open -- in the hopes the equity will remain below $130 through Friday's close, when the weekly series expires.

On the flip side, SSYS's next most active option was the weekly 11/7 110-strike put. It appears these, too, were sold to open. In other words, these traders expect the shares to remain above $110 through week's end.

This morning's gap lower is good news for the call writers, as delta on the out-of-the-money contract has dropped to just 0.01 from 0.22 last night, suggesting a 1% chance the option will be in the money at expiration. However, it's a different story for the put sellers, as their options are now in the money. Moreover, delta on the weekly 110 puts has shifted to negative 0.52 from negative 0.15 on Tuesday evening, meaning there's about a 1-in-2 chance the contract will land in the money Friday night.

As alluded to, Stratasys, Ltd. (NASDAQ:SSYS) is reeling on its most recent earnings report. While the company's third-quarter results actually topped the Street's estimates, the firm lowered its full-year earnings guidance due to increased expenses.

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