Pandora Media Inc (P) Options Volume Swells Amid Pullback

Pandora Media Inc (P) options have caught fire due to the initiation of a short strangle

by Alex Eppstein

Published on Sep 13, 2016 at 12:29 PM

A day after gapping higher on word of new streaming services, Pandora Media Inc (NYSE:P) is getting whacked. Although the firm inked direct licensing agreements with more than 30 record labels, its shares were last seen 2.4% lower at $13.95, while the stock's options pits have caught fire.

Diving right in, Pandora's put options are changing hands at 19 times the usual intraday rate, while calls are crossing at five times the norm. According to Trade-Alert, the bulk of this activity stems from the initiation of a short strangle at the October 13 put and 15 call, totaling over 23,000 contracts. In other words, the trader believes P stock will stick close to the $14 mark through back-month expiration, at the close on Friday, Oct. 21.

Taking a step back, bearish betting has been very popular on the shares. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), P's 50-day put/call volume ratio of 0.52 rests just 2 percentage points from an annual peak.

Moreover, short interest is elevated. By the numbers, over 50 million shares are sold short -- or over one-quarter of P's float -- not far from record levels. At the stock's typical daily trading volume, it would take more than two weeks for these bears to cover their bets.

As mentioned earlier, Pandora Media Inc (NYSE:P) jumped on Monday following news of its forthcoming subscription music services, which could reportedly debut as soon as this Thursday. While the shares have given back those gains -- and then some -- today, they may have found a foothold at their ascending 40-day moving average, which has ushered the stock higher since early May.

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