Are Option Traders Calling a Top for Surging Gray Television, Inc. (GTN)?

Gray Television, Inc. (NYSE:GTN) is exploding on M&A news

by Alex Eppstein

Published on Sep 15, 2015 at 2:19 PM

Gray Television, Inc. (NYSE:GTN) is breaking out this afternoon on a major acquisition. Currently, the media stock is 11.3% higher at $13.06 -- but it looks like option traders are rolling the dice on a ceiling.

At last check, GTN calls are crossing the tape at 37 times the usual intraday rate. Roughly 90% of the activity has transpired at the November 15 strike, with nearly 2,050 contracts exchanged so far. From the look of it, though, these traders are selling to open the calls, anticipating the $15 level will act as resistance from now through November expiration.

This neutral-to-pessimistic outlook isn't unusual. In fact, a glance at recent activity across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals a pronounced bias toward bearish bets over bullish. Specifically, GTN's 10-day put/call volume ratio of 1.84 indicates puts have been bought to open at nearly twice the rate of calls, during the last two weeks.

Further reflecting the prevailing skepticism, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.82 ranks 10 percentage points from an annual peak. In other words, put open interest outstrips call open interest by a near-extreme margin, among options with a shelf-life of three months or less.

Helping us to make sense of this bearish bias, Gray Television, Inc. (NYSE:GTN) had been struggling in the weeks leading up to today. In fact, as of Monday's close at $11.74, the shares were down 35% from their 17-year high of $18.07, tagged in July. Even after today's surge, GTN is still staring up at its previously supportive 40-day moving average.

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