Option Bears Pile On as DSW Inc. (DSW) Nosedives on Earnings

DSW Inc. (DSW) hit a five-year low, after the retailer whiffed on earnings and lowered its outlook

by Alex Eppstein

Published on May 24, 2016 at 11:43 AM
Updated on Jun 24, 2020 at 10:16 AM

DSW Inc. (NYSE:DSW) is fresh off a five-year low of $18.51, after the shoe retailer tanked in the earnings confessional and slashed its full-year outlook. The gap lower has sent intraday options volume rocketing to 23 times the normal rate. Looking more closely, it seems at least one group of DSW options traders foresees even lower lows for the stock in the near future.

Specifically, buy-to-open activity is detected at the out-of-the-money June 17.50 put. By purchasing these positions, options traders anticipate DSW will breach $17.50 by front-month expiration, at the close on Friday, June 17 -- something that hasn't been done since early 2011.

This is more of the same for DSW. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), put buyers have been on the prowl. Specifically, the retail stock's 10-day put/call volume ratio of 0.84 outranks 77% of comparable readings from the last year. Likewise, DSW's Schaeffer's put/call open interest ratio (SOIR) of 1.25 registers in the put-skewed 88th percentile of its annual range.

Elsewhere, short interest has been diving, and the stock is currently on the short-sale restricted list. Nonetheless, over 9% of DSW's float remains sold short, translating into one week's worth of activity, based on the stock's typical trading levels. Also in the shares' bearish corner are analysts, with 10 of 14 sporting "hold" or worse recommendations.

As alluded to, DSW Inc. (NYSE:DSW) has had a disastrous morning. At last check, the retail stock was down 14.6% at $18.55, even as the broader market surges. And unlike this fellow retailer, DSW shows no signs of an intraday rebound.

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