Call Players Bombard Bouncing LendingClub Corp (LC)

LendingClub Corp (NYSE:LC) is soaring today, and call volume is popping

Aug 11, 2016 at 12:32 PM
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LendingClub Corp (NYSE:LC) is soaring today, up 9.5% at $5.37 on no apparent news. The surge has sparked a fire under options players, with contracts crossing at five times the average intraday pace. Call options are outpacing put options by a more than 12-to-1 ratio, and with 17,295 calls on the tape -- volume is in the 97th annual percentile. Meanwhile, LC stock's 30-day at-the-money implied volatility has popped 10.1% to 64.7%.

Most active is LC's August 5 call, and according to the International Securities Exchange (ISE), it looks like some speculators are selling to close their now in-the-money positions ahead of next Friday's expiration. Meanwhile, longer-term traders appear to be purchasing new positions at LC's October 5.50 call, eyeing additional upside over the next several months.

Widening the sentiment scope reveals options traders have shown a clear preference for long calls over puts in recent weeks. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 23,501 calls on LC over the past two weeks, compared to 4,396 puts. Plus, the resultant call/put volume ratio of 5.35 ranks in the 76th annual percentile.

However, there could be another motive to this recent rush of call buying; specifically, at out-of-the-money strikes. Short interest on LC accounts for nearly one-fifth of the stock's available float, meaning short sellers could be using the long calls to hedge their bearish bets against any upside risk.

Looking at the charts, short sellers have been in the driver's seat for some time. Year-over-year, the shares of LendingClub Corp (NYSE:LC) have surrendered 62% -- most recently in the wake of a negative earnings reaction. Plus, today's rally has run out of steam near the $5.60 mark, home to LC stock's mid-May bear-gap highs.

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