Options Traders Saddle Up as Harley-Davidson Inc (HOG) Wipes Out

Harley-Davidson Inc (NYSE:HOG) is getting pummeled after its earnings release

by Josh Selway

Published on Oct 20, 2015 at 3:03 PM
Updated on Oct 20, 2015 at 3:05 PM

Harley-Davidson Inc (NYSE:HOG) is getting toasted today following the company's disappointing third-quarter earnings reveal and downwardly revised profit guidance. The shares were 13% lower at last check at $48.73, and earlier hit an almost three-year low of $46.52. As a result option volume has exploded on the motorcycle maven. 

By the numbers, intraday put volume is running at 20 times the normal amount, with most of the action taking place at the November 50 strike. Looking more closely, over one-third of the 31,000 contracts that have crossed here were bought to open as a block of 10,225 puts, per data from the International Securities Exchange (ISE). This trader is betting on HOG to extend its losses through the close on Friday, November 20, when newly front-month options expire.

Looking back, speculators have generally taken a more bullish stance on the stock. This, according to HOG's 50-day ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.51, which outranks over three-fourths of comparable readings from the past year. 

Outside of the option pits, sentiment stacks up differently. Short interest has been rising steadily, and now accounts for nearly 11% of the stock's float. This level of short interest represent nine days' worth of buying power, at normal trading volumes. Today, though, the equity is short-sale restricted.

Most analysts were already betting against Harley-Davidson Inc (NYSE:HOG)​ before its earnings debacle. Among 17 covering brokerage firms, 10 have designated HOG a "hold." Adding to the bearish bias, the stock this morning received a price-target cut to $52 from $57 at Wunderlich. 

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