Put Players Target Synchrony Financial (SYF) After Worst Session on Record

Synchrony Financial (SYF) is bouncing back after finishing its worst day on record Tuesday

Jun 15, 2016 at 10:38 AM
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After putting in its worst session on record Tuesday, dropping 13% by the close, consumer finance stock Synchrony Financial (NYSE:SYF) is dipped even lower out of the gate this morning. The stock has bounced back, though, last seen up 1.7% at $26.89. Tuesday's bear gap came after the company said it expects a 20 to 30 basis point increase in charge-off rates over the next year. Analysts have been weighing in today, with five brokerage firms lowering their price targets on the stock so far. Citigroup set the lowest target, at $31 -- still a 15% premium over SYF's current value. And with the stock sitting on the short-sale restricted (SSR) list, bearish options traders have shown up in force.

SYF puts were popular Tuesday, crossing at eight times their typical daily volume, with roughly 18,000 traded in all. Most active were the June 26.50 and 28 strikes, where traders purchased new positions, expecting the stock to continue its slide through the end of the day Friday, when the front-month series expires.

Today, SYF options are changing hands at 12 times their expected intraday rate, with roughly 17,000 contracts on the tape, compared to an average of just 1,810 at this point in the day. Puts have a slight lead over calls, with the July 26 put taking the most active spot.

Stepping back, traders have been favoring SYF calls over puts on an absolute basis in recent weeks. In fact, long calls outnumbered puts nearly 9-to-1 over the past 50 sessions on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

Analysts have been in SYF's bullish corner lately, too. Currently 11 of the 13 brokerages providing coverage maintain a "buy" or better rating on the shares, without a single "sell" to be found. Meanwhile, the average 12-month price target on the stock sits at $35.90 -- just shy of SYF's record high of $36.40, seen last July.

Short interest has been on the rise, however, with these pessimistic bets climbing by nearly 13% during the most recent two-week reporting period. Still, just 1.5% of SYF's available float is currently sold short, leaving plenty of room for more bears to pile on once the stock is removed from the SSR list. An influx of downbeat attention from traders and analysts could put pressure on Synchrony Financial (NYSE:SYF).

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