Why Pessimism Prevails on Kandi Technologies Group, Inc. (KNDI)

Kandi Technologies Group Inc (KNDI) has come back down to earth in recent sessions

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Published on Mar 20, 2015 at 12:21 PM
Updated on Apr 20, 2015 at 5:32 PM

Kandi Technologies Group Inc (NASDAQ:KNDI) is down 2% this afternoon at $12.76, as the shares have surrendered all their gains from Monday's earnings-induced bull gap. Also, the stock's 30-day at-the-money implied volatility has dropped 3.9% to an annual low of 61%, while calls and puts are both crossing at accelerated rates.

Jumping in, KNDI's most active option is the April 12 put, and some of this volume may represent the initiation of new bearish bets. In short, these buyers anticipate the shares will breach $12 by the close on Friday, April 17, when the soon-to-be front-month options expire. Historically, though, the equity hasn't settled a session south of $12 since Jan. 20. As such, delta on the put is negative 0.34, suggesting the option has a roughly 1-in-3 chance of being in the money at expiration.

Today's apparent put buyers aren't the only ones betting on KNDI to slide. In fact, over one-fifth of the stock's float is sold short, representing seven sessions' worth of trading, at typical volumes.

These high levels of pessimism aren't particularly surprising, considering Kandi Technologies Group Inc's (NASDAQ:KNDI) lackluster technical track record. Since hitting a late-July record high of $22.49, the shares are off 43.3%.


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