Options Stay Hot as LendingClub Corp (LC) Gets Clobbered

Traders are taking to the options pits as LendingClub Corp (NYSE:LC) sinks to new record lows

May 10, 2016 at 11:53 AM
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LendingClub Corp (NYSE:LC) is still under fire today, following Monday's surprise resignation of CEO Renauld Laplanche, which completely overshadowed the company's first-quarter earnings report. An internal probe revealed improper practices in the technology-based lending service, and Morgan Stanley thinks the departure "will potentially slow new partnerships and possibly strain existing ones." In any case, shares of LC are off 5.7% at $4.35, after hitting another record low of $3.98 earlier today, and the stock's options are trading at a rapid-fire rate. 

LC is firmly on the short-sale restricted list again today -- though short interest on the equity was already running high -- sending pessimistic traders to the options pits. At last check, LC options were crossing the tape at seven times their typical intraday rate, with puts outpacing calls roughly 3-to-1. In fact, open interest on LC is seated at a 12-month high, following annual-high stock and options volume yesterday. 

Drilling down, the June 5 put -- which saw nearly 41,700 contracts added yesterday -- is the most active contract yet again, though it looks like some of the action may be sell-to-close, indicating traders are taking profits amid LC's plunge. 

Elsewhere, however, speculators are targeting the May 4 put and the June 3 put, where new positions are apparently being bought to open. These put buyers are betting that the security will continue its slide through the options' expiration dates of May 20 and June 17, respectively.

This week's heavy preference for puts is a change of pace for the stock, however. LC holds a Schaeffer's put/call open interest ratio (SOIR) of 0.56 -- showing calls nearly double puts among options expiring in three months or less. In fact, this ratio sits lower than nearly two-thirds of the past year's readings, meaning near-term options traders have been unusually call-skewed toward LC of late.

And outside of the options pits, analysts have been largely optimistic, with the majority rating the security a "buy" or better. But at least five brokerage firms have already lowered their outlooks for the shares since yesterday, and with an average 12-month price target of $11.06 -- a 154% premium over today's value -- there is plenty of room for further cuts, which could drive LendingClub Corp (NYSE:LC) to even lower lows.

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