Option Bulls Hold Out Hope For Whole Foods Market, Inc. (WFM)

Whole Foods Market, Inc. (WFM) is spiraling yet again -- this time, after a bearish note from Northcoast

Jun 15, 2016 at 12:57 PM
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Whole Foods Market, Inc. (NASDAQ:WFM) stock is reeling yet again, just a day after getting roughed up by the U.S. Food and Drug Administration (FDA). Making matters worse, Northcoast lowered its rating on the shares to a "sell." Meanwhile, stock volume is taking off -- in the 98th annual percentile -- while WFM options are trading at three times the normal intraday rate.

Right now, the most active WFM option is the weekly 6/24 32-strike call. All indications hint at buy-to-open activity, suggesting traders think the grocery stock will rebound above $32 by next Friday's close, when the weekly series expires. However, WFM's bleeding shows no signs of stopping, with the shares down 4.2% at $31.17. In fact, since its most recent peak at $35.58 one week ago, the stock has given back over 12%.

One group potentially profiting from this sharp move lower is short sellers. Nearly 13% of WFM's float is sold short, and at the stock's typical trading levels, it would take nine sessions to cover these bets. And, like Northcoast, analysts have struck a bearish chord with respect to the shares. Sixteen of 18 brokerages currently consider WFM a "hold" or worse.

On the other hand, put sellers may be on pins and needles. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Whole Foods Market, Inc. (NASDAQ:WFM) has seen nearly 10,900 puts sold to open over the past 10 sessions, versus just 5,000 bought to open. With the stock in free-fall mode, the option writers could be exposed to steep losses if their strikes get breached.

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