Sears Holdings Corp (SHLD) Call Volume Hits Annual High on Craftsman Chatter

Sears Holdings Corp (SHLD) call volume hit an annual high, as the stock rallies on reports of buyer interest for its Craftsman business

Oct 4, 2016 at 1:54 PM
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Call volume just hit an annual high on Sears Holdings Corp (NASDAQ:SHLD), as the stock rallies on reports that its Craftsman business is drawing buyer interest from Stanley Black & Decker, Inc. (NYSE:SWK) and several foreign companies. At last check, SHLD was 3.1% higher at $11.72, after touching a one-month high of $13.69 and being halted earlier. What's more, roughly 6 million SHLD shares have traded, far surpassing the May 26 annual high of about 2.9 million shares.

Meanwhile, nearly 6,600 SHLD call options have changed hands already today, topping the May 25 annual high of 6,027 calls traded, and representing six times the stock's average intraday call activity. On the flip side, fewer than 2,000 SHLD put options have crossed the tape, in line with the average.

It looks like options bulls are buying to open the weekly 10/7 11.50-strike call, betting on more upside north of $11.50 through the end of the week, when the options expire. On the other hand, potential sell-to-open action has been spotted at the out-of-the-money March 18 call -- the most active on the day. By writing the calls to open, the sellers expect SHLD to remain beneath $18 through the next several months.

The $18 area, in fact, has acted as a speed bump for SHLD in 2016, and most recently capped the stock's summer rebound. Since then, the shares have backpedaled -- with help from an uninspiring earnings report in late August -- and recently found a familiar ally in the $10.50-$11 region, which acted as a floor in May.

In the options arena, bearish bets have been heating up during the past two weeks. The stock's 10-day put/call volume ratio of 4.60 is higher than 88% of all other readings from the past year. In that same vein, short interest on Sears Holdings Corp (NASDAQ:SHLD) edged 2.2% higher during the most recent reporting period, and now represents a whopping 67% of the stock's total available float.

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