Put Buying Nears Peak Levels on Under Armour Inc (UA)

Both put buying and short selling have been ramping up on Under Armour Inc (NYSE:UA) this year

Mar 2, 2016 at 11:30 AM
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Put buying has neared peak levels in Under Armour Inc's (NYSE:UA) options pits in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio has jumped to 1.70 from 1.10 since the start of the year, and now ranks in the 95th percentile of its annual range. In other words, puts have been bought to open over calls at a faster clip just 5% of the time within the past year.

Over the past 10 sessions, the stock's weekly 3/11 series has been hot, with the 74.50- and 79-strike puts among the options seeing the largest open interest increases on UA. However, the equity's weekly 3/11 84.50-strike call only slightly edges these two puts out for the top spot -- and with all three seeing similar volume on Feb. 23, it could be at the hands of one speculator initiating some sort of larger options strategy.

Widening the scope, in the front three-months' series of options, peak put open interest of 4,850 contracts is found at the April 90 strike. For those buying to open the puts, the goal is for UA to settle south of $90 at the close on Friday, April 15 -- when the options expire.

Meanwhile, those currently purchasing UA's near-term options are in luck. Not only does its Schaeffer's Volatility Index (SVI) of 35% sit below 61% of all comparable readings taken in the past year, but its 30-day at-the-money implied volatility of 33.8% sits in the 41st annual percentile. In other words, premium on the security's short-term options are pricing in relatively low volatility expectations at the moment.

Additionally, UA's Schaeffer's Volatility Scorecard (SVS) is docked at a lofty 83. What this means is that the options market has tended to underprice the equity's ability to make big moves on the charts.

Outside of the options pits, skepticism has been ramping up. Specifically, short interest jumped 11.3% in the most recent reporting period to 28.7 million shares -- the highest amount since August 2012. What's more, these bearish bets account for 16% of UA's available float, or 5.7 times the average daily pace of trading.

On the charts, the stock has explored a range of more than 40% over the past 52 weeks, calculating peak ($105.89, Sept. 17) to trough ($63.23, Jan. 20). More recently, Under Armour Inc (NYSE:UA) has bounced 32.3% off this annual low -- thanks in part to a post-earnings bull gap -- to linger near $83.87. Should the shares continue this momentum and break out above recent resistance in the $85-$86 region, an unwinding of pessimism both in and out of the options arena could help fuel UA's fire.


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