Weekly Options in Demand as Lumber Liquidators Holdings, Inc. (LL) Crashes

Lumber Liquidators Holdings Inc (NYSE:LL) is sinking, after the company's CEO unexpectedly resigned

May 21, 2015 at 10:58 AM
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Lumber Liquidators Holdings Inc (NYSE:LL) has plenty to discuss at today's annual shareholder meeting -- namely, the unexpected resignation of CEO Robert Lynch, as well as the plunging share price. Today, in fact, shares of LL are off 15% at $21.53 -- and earlier hit a three-year low of $20.92 -- earning the stock a place on the short-sale restricted list. In the options pits, overall volume has soared to five times the average intraday pace, with a number of traders rolling the dice on LL's end-of-week trajectory.

Drilling down, a handful of LL's most active options expire at tomorrow's close. While speculators appear to be closing their weekly 5/22 26-strike puts, new positions are being opened at the equity's weekly 5/22 19.50-, 20-, and 20.50-strike puts, as well as 22.50-strike calls.

By the looks of it, traders are buying to open the 19.50- and 20.50-strike puts, betting on LL to extend today's retreat through week's end. Meanwhile, eleventh-hour optimists appear to be initiating new long positions at the 22.50-strike calls, gambling on the equity to bounce back over the next two sessions. Elsewhere, non-traditionalists are possibly selling to open the 20-strike puts, taking a chance the round-number mark will serve as a short-term floor.

Action is being taken outside of the options pits, as well. Specifically, Raymond James cut its rating to "market perform" from "outperform." This isn't the first bearish brokerage note Lumber Liquidators Holdings Inc (NYSE:LL) has received this week, and it may not be the last. Two out of 12 analysts still maintain a "buy" or better rating on the equity, with not a single "sell" to be found. Plus, the average 12-month price target of $31.83 stands at a 48% premium to current trading levels.

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