Option Bears Target El Pollo Loco Holdings Inc (LOCO) Amid Sell-Off

Front-month puts were popular on El Pollo Loco Holdings Inc Tuesday

Nov 19, 2014 at 10:10 AM
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El Pollo Loco Holdings Inc (NASDAQ:LOCO) has been moving lower since reporting earnings earlier this month, with the shares off 15.5% from their Nov. 6 close at $37.30. On Tuesday, put players targeted the stock, rolling the dice on additional losses through week's end.

Taking a quick step back, puts traded at four times the daily average yesterday, and outpaced calls by a more than 7-to-1 margin. All but one of the equity's 10 most active options were of the front-month variety, with traders paying particular attention to LOCO's November 32 and 33 puts.

Nearly 5,000 contracts collectively traded at these two puts -- mostly at the ask price, hinting at buyer-driven activity. Implied volatility jumped at each strike, and open interest rose overnight, making it safe to assume new positions were initiated.

Today, El Pollo Loco Holdings Inc (NASDAQ:LOCO) is heading south once again, and was last seen down 2.1% at $31.50. Amid this decline, delta on the higher-strike put has moved to negative 0.76 from negative 0.62 at last night's close, implying a greater probability the option will be in the money at Friday's close, when the front-month contracts expire. Likewise, delta on the lower-strike put has risen to negative 0.60 from negative 0.46.

 

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