China Finance Online Co. Limited (JRJC) Bears React to Short-Seller Report

China Finance Online Co. (ADR) (NASDAQ:JRJC) gets a lift after the company responds to short-selling report

by Josh Selway

Published on Jun 4, 2015 at 1:59 PM
Updated on Jun 24, 2020 at 10:16 AM

After falling out of the gate due to a damaging report that emerged yesterday from Geoinvesting, LLC, China Finance Online Co. (ADR) (NASDAQ:JRJC) has since turned positive. Helping JRJC reverse course is the company's response, which said it "contains numerous errors of facts, misleading speculations and malicious interpretations of events." The shares were 7.1% higher at last check, trading at $5, but were still on the short-sale restricted (SSR) list. Meanwhile, puts are trading at 10 times the expected intraday rate.

In lieu of shorting the stock, traders are placing long-term bearish bets by buying to open the January 2017 5-strike put. By purchasing the contracts at a volume-weighted average price (VWAP) of $2, these traders are betting on JRJC to breach $3 (strike less VWAP) by January 2017 expiration.

It's not the least bit surprising to see this interest in JRJC's puts. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.95 is only 1 percentage point from an annual high. Simply stated, the stock's short-term option traders are far more put-skewed than normal. 

On the charts, China Finance Online Co. (NASDAQ:JRJC) has been a disappointment. Over the past three months, the shares have trailed the S&P 500 Index (SPX) by over 24 percentage points. What's more, the stock has encountered a stern layer of resistance from its 200-day moving average since late March.


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