Gloomy Outlook Lures Dunkin Brands Group Inc (DNKN) Option Bears

Option traders react after Dunkin Brands Group Inc lowered its 2015 same-store sales growth forecast

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Published on Dec 18, 2014 at 11:19 AM
Updated on Apr 20, 2015 at 5:09 PM

Dunkin Brands Group Inc (NASDAQ:DNKN) has tumbled to an 8.2% loss this morning -- and was last seen at $42.42 -- following a reduction in its 2015 same-store sales growth forecast. Also, shares of the coffee chain were hit with a price-target cut to $43 from $44 at Janney, which reiterated its "neutral" rating. As the stock suffers, option bears are piling on.

At last check, puts were trading at 27 times the expected intraday rate. DNKN's March 42.50 strike is seeing buy-to-open activity, as speculators roll the dice on continued downside over the next three months.

Ahead of March options expiration, DNKN is scheduled to report fourth-quarter earnings -- specifically, before the open on Thursday, Feb. 5. This could work in the bears' favor. Over the last four quarters, the equity has averaged a single-session post-earnings loss of 2.2% -- including a 6% drop in late October.

Longer term, DNKN hasn't provided much reason for optimism, either. The shares have shed 12% of their value in 2014, and are exploring the south side of $43 for the first time since early August.

Despite this technical weakness, Dunkin Brands Group Inc (NASDAQ:DNKN) has seen plenty of bullish betting at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) in recent weeks. The stock's 10-day call/put volume ratio across these exchanges is a mind-bending 82.0, higher than 99% of comparable readings from the previous year.

Daily Chart of DNKN Since January 2014


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