Big Lots, Inc. (BIG) Puts Popular Amid Post-Earnings Plunge

Big Lots, Inc. is down more than 15% following its quarterly earnings report

Dec 5, 2014 at 2:40 PM
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A wider-than-expected third-quarter loss and a price-target cut to $52 from $53 at Deutsche Bank have sent shares of Big Lots, Inc. (NYSE:BIG) decidedly lower today. At last check, the stock was off 15.4% at $40.56 -- earning BIG a spot on the short-sale restricted list. Against this backdrop, puts are trading at 11 times what's typically seen at this point in the day, as speculators look for alternate ways to bet bearishly on the security.

Specifically, the equity's December 40 put has seen the most action today, with 1,704 contracts on the tape. A healthy portion of these puts have traded at the ask price, and fewer than 200 contracts are currently in residence at this round-number strike, making it safe to assume new positions are being purchased. Delta on the put is docked at negative 0.42, suggesting a roughly 2-in-5 chance the position will be in the money at the close on Friday, Dec. 19, when front-month options expire.

From a wider sentiment perspective, today's put-skewed session just echoes the withstanding trend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 2.63 ranks in the 95th annual percentile. Considering Big Lots, Inc. (NYSE:BIG) was up nearly 49% year-to-date heading into today's session, this recent rush of put buying may have been at the hands of shareholders protecting paper profits against an unexpected decline.

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