Option Bears Aren't Buying Seagate Technology PLC's (STX) Rally

An upbeat Barron's column has done little to sway Seagate Technology PLC (STX) option buyers

by Kirra Fedyszyn

Published on Apr 11, 2016 at 2:35 PM
Updated on Jun 24, 2020 at 10:16 AM

Seagate Technology PLC (NASDAQ:STX) is up 6.5% at $35.38 today, after an upbeat article in Barron's, which called the stock's dividend yield "enticing" (subscription required). In addition, the author waxed optimistic on demand for large drives utilized in data centers. With this rally, STX has pared its year-to-date loss to 3.5% -- likely to the dismay of recent option buyers.

Speculators have been regarding STX with caution lately. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.51 sits higher than 77% of readings in the past year. Echoing this is STX's Schaeffer's put/call open interest ratio (SOIR) of 1.14 -- in the 86th percentile of its annual range, indicating that near-term traders are far more put-heavy than usual.

Today, STX options are trading at nearly twice their typical intraday pace, but that doesn't mean speculators are changing course. In fact, one of the most active options is the May 36 put, where traders appear to be buying to open new positions. These put buyers are betting that shares of STX will remain below the $36 level through May 20, when the back-month option expires.

Pessimism is rampant outside of the option pits, as well. Of the 21 analysts following STX, 15 rate it a "hold" or worse. And Cowen and Company initiated coverage on the equity this morning with a tepid "market perform" rating and $36 price target. Short interest also remains elevated, representing about seven sessions' worth of trading, at STX's typical daily volume.

However, today's rally may be running out of steam at the shares' 140-day moving average, which capped STX's late-March pop. In fact, Seagate Technology PLC (NASDAQ:STX) hasn't toppled this trendline in more than a year.

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