500.com Limited (WBAI) Struggles Entice Option Bears

Put buyers, short sellers have 500.com Ltd (WBAI) in their sights

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Published on Mar 9, 2015 at 1:38 PM
Updated on Apr 20, 2015 at 5:32 PM

500.com Ltd (NYSE:WBAI) is sitting on a nearly 11% deficit this afternoon -- bucking the broad-market trend higher -- and at last check, was hovering near $12.96. Meanwhile, with the Chinese lottery stock on the short-sale restricted list, put volume has spiked to triple its expected intraday rate -- as speculators seek alternative avenues to place bearish bets.

Looking more closely at the action, the March 10 put is seeing considerably more volume than any other WBAI strike. By the numbers, more than 5,500 contracts have changed hands at the out-of-the-money put, whereas the next most active option has seen fewer than 900 contracts cross the tape. By initiating these long positions, the buyers anticipate the equity will breach the round-number $10 level by the close next Friday, when front-month options expire.

Turning to the charts, it's been a disastrous year for WBAI. Over the last 12 months, the shares have plunged 72.5%. In fact, the stock touched a record low of $7.31 just one week ago, following news of online sales suspensions at sports lottery administration centers.

With 500.com Ltd (NYSE:WBAI) exhibiting downside momentum, short sellers have been piling on. During the two most recent reporting periods, short interest shot nearly 18% higher, and now makes up 22.6% of the security's float. At WBAI's typical trading volume, it would take more than a week to cover these bearish bets.


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