Bears Pounce On Battered Lumber Liquidators Holdings, Inc. (LL)

Lumber Liquidators Holdings Inc (LL) can't seem to recover from recent bad press

Digital Content Group
Mar 9, 2015 at 2:17 PM
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A recent "60 Minutes" report -- which has sparked calls for a federal investigation, as well as a series of class action lawsuits -- continues to hang over the head of Lumber Liquidators Holdings Inc (NYSE:LL). Specifically, the shares are down another 13.6% this afternoon at $28.75, after earlier touching a two-year low of $28.25 and landing on the short-sale restricted list. Accordingly, put buying has picked up on LL, as traders wager on additional downside for the stock.

Diving right in, the equity's options are crossing at five times the expected intraday pace, with puts outstripping calls on an absolute basis. Two contracts seeing buy-to-open activity are the March 21 and 22 puts, as option players are convinced LL will continue its slide -- and settle below the respective strikes at next Friday's closing bell, when the front-month series expires.

Historically speaking, the shares haven't explored territory south of $22 in roughly three years. Thus, delta on the higher-strike put is negative 0.15, while delta on the lower-strike contract is an even slimmer negative 0.12.

Given Lumber Liquidators Holdings Inc's (NYSE:LL) fall from grace, it shouldn't come as a surprise that short sellers have streamed toward the stock. During the most recent reporting period, short interest swelled 13%, and now accounts for nearly 30% of the equity's total float. To put that in perspective, it would take approximately three weeks to repurchase all of these shorted shares, at LL's average daily trading volume.

 

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