Option Bears Bet On Mattel, Inc. (MAT) to Slide After Earnings

Toy maker Mattel, Inc. (NASDAQ:MAT) is trading 4.7% lower at $26.30 ahead of its fourth-quarter earnings report, due after the market closes tonight. Meanwhile, put options are trading at an unusually rapid clip -- 11 times their typical intraday rate, in fact, with roughly 10,000 puts exchanged so far. In particular, it looks like many pre-earnings MAT bears are targeting the February 22 put, where over 6,000 contracts have already traded.

Many of these out-of-the-money MAT puts were bought to open, according to data from the International Securities Exchange (ISE) -- pointing to expectations for a post-earnings sell-off in Mattel shares. And the options market is pricing in a post-earnings move of about 12%, compared to MAT's average one-day price swing of 4.7% over the last eight quarters.

Pessimism among option traders is nothing new for the security, which has a 10-day put/call volume ratio of 2.82 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks higher than 91% of all readings in the past year, as speculators have rarely shown a greater preference for puts over calls.

MAT has been trending higher since hitting a five-year low of $19.45 in early October, and has established support at both its 50-day and 80-day moving averages in recent months. In fact, the shares have outperformed the S&P 500 Index (SPX) by 20 percentage points over the past two months.

Still, six out of 11 analysts rate the equity a "hold" or worse. And while short interest on MAT has slipped by 14% during the two most recent reporting periods, nearly 16% of the stock's available float remains tied up in these bearish bets. At Mattel, Inc.'s (NASDAQ:MAT) average daily trading volume, it would take almost two weeks to buy back all these shares. In other words, there's plenty of sideline cash to fuel a serious rally, especially if tonight's earnings beat estimates (and impress skeptical analysts).