Optimism Fades on Sinking Kansas City Southern (KSU)

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

by Karee Venema

Published on Mar 23, 2015 at 1:13 PM
Updated on Jun 24, 2020 at 10:16 AM

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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