Puts Pop as Harman International Industries Inc. (HAR) Plunges

Harman International Industries Inc./DE/ (NYSE:HAR) is one of the leading laggards on the Nasdaq, after a dismal turn in the earnings confessional

by Karee Venema

Published on Apr 30, 2015 at 11:09 AM
Updated on Jun 24, 2020 at 10:16 AM

Harman International Industries Inc./DE/ (NYSE:HAR) is one of the leading laggards on the Big Board today -- along with online review specialist Yelp Inc (NYSE:YELP) -- after the firm posted a first-quarter earnings miss and downwardly revised its full-year profit forecast. At last check, the stock was off 4.8% at $133.82, and on the short-sale restricted list. Against this backdrop, puts are trading at 35 times the average intraday pace, as speculators look for alternate ways to bet bearishly on HAR.

Drilling down, the stock's May 115 and 120 puts have seen the most action, with a collective 2,725 contracts on the tape thus far -- 66% of the total intraday put volume. It looks as if a portion of the activity is of the buy-to-open kind, meaning traders expect HAR to breach the respective strike prices by the close on Friday, May 15 -- when front-month options expire. Earlier, the equity bottomed out at an intraday low of $119.10, but found a foothold at its 120-day moving average.

Widening the sentiment scope reveals HAR option traders have recently shown a growing affinity for long puts over calls. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio has jumped to 1.00 from 0.34 over the past two weeks. What's more, the current ratio ranks in the 66th annual percentile, meaning puts have been bought to open over calls at a faster-than-usual clip.

Heading into today's session, Harman International Industries Inc./DE/ (NYSE:HAR) was enjoying an impressive 31% year-to-date lead, thanks in part to a pair of well-received fundamental developments in late January that prompted a bull gap. In fact, the stock hit its highest perch on record of $149.12 one week ago today. As such, it's possible some of the recent put buying -- particularly at out-of-the-money strikes -- is a result of shareholders protecting paper profits against an unexpected decline.


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