Keurig Green Mountain, Inc. (GMCR) Bears Target a Critical Level

Keurig Green Mountain Inc (NASDAQ:GMCR) hasn't closed a week south of $90 since late-January 2014

by Karee Venema

Published on May 18, 2015 at 1:44 PM
Updated on Jun 24, 2020 at 10:16 AM

Keurig Green Mountain Inc (NASDAQ:GMCR) earlier breached the $90 mark for the first time since February 2014 -- bottoming at $89.89 -- and was last seen 4.5% lower at $90.04. The move to new annual lows has sparked a rush of put activity in GMCR's options arena, with the contracts crossing at 1.8 times the average intraday pace, and a number of speculators are rolling the dice on additional losses over the next two weeks.

Specifically, GMCR's weekly 5/29 90-strike put is one of the more active options today, and it looks as if new positions are being purchased for a volume-weighted average price (VWAP) of $1.62. Based on this average entry price, breakeven for the put buyers at next Friday's close -- when the series expires -- is $88.38 (strike less VWAP). Of note, GMCR hasn't settled a week south of $90 since Jan. 31, 2014.

Widening the sentiment scope reveals put buying has been popular in GMCR's options pits of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GMCR's 10-day put/call volume ratio of 0.97 ranks in the 85th annual percentile. In other words, long puts have been initiated over long calls at a faster-than-usual clip.

This skepticism is beginning to spill over to the analyst community, as well. However, more than half of those covering the shares maintain a "buy" or better rating, and the average 12-month price target of $123.67 stands at a 37.4% premium to current trading levels. In other words, the door is wide open for another round of bearish brokerage notes should Keurig Green Mountain Inc (NASDAQ:GMCR) extend its 32% year-to-date deficit.

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