Bears Keep Betting as Things Get Worse for Keurig

Keurig Green Mountain Inc (NASDAQ:GMCR) has had a horrible few months, and bears are betting on more downside

Jun 12, 2015 at 10:53 AM
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It's been an abysmal few months for Keurig Green Mountain Inc (NASDAQ:GMCR). Since touching an all-time high of $158.87 in mid-November, the stock has been in free fall, losing nearly half its value since. That trend is continuing today, with GMCR down 2.2% at $82.43, after earlier hitting an annual low of $80.83. What's more, option traders are betting on extended losses for the coffee brewer.

Puts are running at double the expected mid-morning pace. The most popular strike is the June 85 put, with signs pointing to possible buy-to-open activity. By purchasing the puts for a volume-weighted average price (VWAP) of $3.68, traders are looking for GMCR to fall below $81.32 (strike less VWAP) before the options expire at next Friday's close.

This increased attention on put buying is just more of the same from the security's option traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GMCR has amassed a 10-day put/call volume ratio of 0.96, which is higher than four-fifths of readings from the past year.

This pessimism has spread outside the option pits, as well. During the last two reporting periods, short interest jumped by almost 34%, and now accounts for over 9% of GMCR's float. In fact, over the past three months, short interest on the equity has nearly doubled.

Today's dip was sparked by a downgrade at UBS, which cut its rating Keurig Green Mountain Inc (NASDAQ:GMCR) to "neutral" from "buy," and slashed its price target by $28 to $86. There's still some hope for GMCR shareholders, though. The stock's 14-day Relative Strength Index (RSI) is now at 27, in oversold territory.

 

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