Altisource Portfolio Solutions S.A. (ASPS) Traders Predict a Pullback

Altisource Portfolio Solutions S.A. (ASPS) is enjoying a halo lift, but option buyers remain wary

Jan 26, 2015 at 10:55 AM
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The shares of Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) are up 8% at $23, thanks to a halo lift from mortgage lender Ocwen Financial Corp (NYSE:OCN), which settled with California regulators. Nevertheless, ASPS puts remain the options of choice, with speculators rolling the dice on an extended slump for the stock, which has shed nearly one-third of its value already in 2015.

ASPS puts are running at 1.5 times the average intraday pace, with traders apparently buying to open the deep out-of-the-money February 15 put. These contracts won't move into the money unless ASPS breaches $15 -- territory not charted in more than five years -- by the close on Friday, Feb. 20, when front-month options expire.

As alluded to earlier, today's appetite for bearish bets is more of the same for ASPS. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.09 ranks in the 62nd percentile of its annual range. In other words, option buyers have picked up ASPS puts over calls at an accelerated clip during the past two weeks.

Echoing that, short interest grew 12.1% during the most recent reporting period, and now accounts for a whopping 40.8% of ASPS' total available float. At the equity's average pace of trading, it would take about six sessions to buy back these bearish bets.

This broad skepticism isn't surprising, though, as Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) has underperformed the S&P 500 Index (SPX) by more than 70 percentage points during the past three months. The security touched a multi-year low of $16 about two weeks ago, and continues to face resistance at its 10-day and 20-day moving averages.

Daily Chart of ASPS since September 2014 with 10-Day and 20-Day Moving Averages

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