Option Bulls Rally Around Lumber Liquidators Holdings, Inc. (LL)

Lumber Liquidators Holdings Inc (LL) option traders expect more short-term upside

by Andrea Kramer

Published on Mar 25, 2015 at 11:09 AM
Updated on Apr 20, 2015 at 5:32 PM

Lumber Liquidators Holdings Inc (NYSE:LL) is up 7.1% at $30.87, after the Consumer Products Safety Commission said the company is cooperating in an investigation of its laminate flooring, first brought up by a damning "60 Minutes" segment. Even before the 10 a.m. ET announcement, LL calls were running hot, and are now trading at three times the average intraday pace. At a glance, it looks like traders are gambling on more upside for LL by the end of the week.

In fact, weekly 3/27 options account for eight of the 10 most active strikes thus far. Buy-to-open activity has been detected at the weekly 3/27 30-, 31-, 32-, and 33-strike calls, with the buyers hoping LL muscles north of the respective strikes through Friday's close, when the contracts expire. The shares peaked at $31.96 today.

This morning's appetite for short-term calls is par for the course for LL, though. The equity's Schaeffer's put/call open interest ratio (SOIR) sits at an annual low of 1.05, implying that near-term traders haven't been more call-biased during the past year.

Likewise, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 1.26 registers in the 86th percentile of its annual range, reflecting a bigger-than-usual affinity for long calls over puts of late. However, with short interest accounting for 28% of Lumber Liquidators Holdings Inc's (NYSE:LL) total available float -- and with the stock still down more than 50% year-to-date -- it's possible some of those calls may have been bought to hedge short positions.


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