Optimism Fades on Sinking Kansas City Southern (KSU)

Kansas City Southern (KSU) put volume is running at 10 times the average intraday pace

Mar 23, 2015 at 1:13 PM
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Kansas City Southern (NYSE:KSU) is bucking the day's broad-market uptrend -- down 8.4% at $105.99 -- after the freight firm downwardly revised its current-quarter and full-year revenue forecasts. Also weighing on the stock is a price-target cut to $109 from $113 at Macquarie. Against this backdrop, put volume has jumped to 10 times what's typically seen at this point in the day, with both long- and short-term traders apparently rolling the dice on extended losses.

On the long-term side, KSU's January 2016 95- and 100-strike puts have received notable attention, and it appears as if some of the activity is of the buy-to-open kind. In other words, speculators are gambling on the security to move south of the respective strikes by January options expiration.

Meanwhile, short-term traders have set their sights on KSU's weekly 3/27 105-strike put, where it seems new positions are being purchased. For those initiating long puts, the goal is for the stock to breach the $105 mark by this Friday's close -- when the weekly series expires -- territory not charted by KSU since last June.

From a wider sentiment perspective, today's accelerated put activity marks a change of pace toward a stock that's shed 13.1% year-to-date, and is on pace to close south of its 320-day moving average for the first time since late January. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Kansas City Southern's (NYSE:KSU) 10-day call/put volume ratio of 6.60 ranks in the 94th annual percentile. Simply stated, calls have been bought to open over puts with more rapidity just 6% of the time within the past year.

Daily Chart of KSU Since January 2015 With 320-Day Moving Average
 

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