Option Bears Eat GrubHub Inc (GRUB) Alive

GrubHub Inc (NYSE:GRUB) put buyers continue to target the stock

by Josh Selway

Published on May 19, 2016 at 12:25 PM
Updated on May 19, 2016 at 12:25 PM

Bearish options traders have been lining up for food delivery stock GrubHub Inc (NYSE:GRUB). Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), an absurd 18.85 put options have been bought to open for every call during the past two weeks. Plus, GRUB's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.83. Both of these readings rank in their 95th annual percentiles, meaning GRUB put options have been far more popular than normal. 

Two of the most popular GRUB put options during the past two weeks -- judging by open interest added -- were the June 22.50 and 25 strikes. Data from the major options exchanges confirms buy-to-open activity at each strike, as options traders bet on extended losses from GRUB shares over the next month. 

This bias is only accelerating today, with put options trading at 12 times the intraday norm. In fact, nearly 9,000 puts have been exchanged, compared to fewer than 300 calls​. The most popular option overall is the June 20 put, thanks to a 4,178-contract block that was newly purchased as part of a spread or roll down, opposite a lot of 1,535 June 25 puts. Elsewhere, the June 22.50 put is popular, and seeing clear-cut buy-to-open activity, according to Trade-Alert.

GRUB speculators aren't alone in their pessimism. The stock's short-interest ratio comes in at a whopping 20.60, meaning it'd take GRUB short sellers more than four weeks to cover their positions, at average daily trading volumes. On the other hand, the majority of covering analysts actually recommend buying the stock, and none rate it a "sell" -- leaving the door open for downgrades. 

On the charts, the bears' view seems to make more sense. GRUB has dropped 45% in the past 12 months to trade at $21.94. Also, the shares recently sold off post-earnings despite the company beating estimates and announcing an acquisition to help it expand in Los Angeles.

Looking back earlier this year, GrubHub Inc (NYSE:GRUB) slid due to growing competition from start-up Uber, and with Uber finding headlines again today, this may help explain the stock's 1.8% loss. In other news, company director David Fisher was just granted nearly 8,300 GRUB options, according to a recent Securities and Exchange Commission (SEC) filing.

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