Options Volume Ramps Up on Reeling Rent-A-Center Inc (RCII)

Rent-A-Center Inc (RCII) has touched a nearly 15-year low, due to a profit warning

by Alex Eppstein

Published on Oct 11, 2016 at 11:31 AM

Earnings season has gotten off on the wrong foot, with Alcoa Inc (NYSE:AA) tanking. From the looks of it, things aren't about to get better. Fresh off a preliminary third-quarter profit warningRent-A-Center Inc (NASDAQ:RCII) -- along with this genetics stock -- is leading the Nasdaq lower. Shares of the rental outlet have plummeted 28.6% to $9.20 and landed on the short-sale restricted list -- and even touched a roughly 15-year low of $8. All the while, the stock's options are flying off the shelves.

By the numbers, RCII options are changing hands at 14 times the expected intraday rate. What's more, total volume is running in the 99th percentile of its annual range -- though the stock's options are relatively lightly traded, overall. At last check, calls and puts are changing hands at near-identical clips.

Shifting to open interest, current levels suggest short-term traders have been very put-focused. RCII's Schaeffer's put/call open interest ratio (SOIR) stands at a top-heavy 3.44, with puts more than tripling calls. Additionally, this reading outstrips 97% of all others from the previous year.

The 12.50 strike has been especially popular in the front three-months' series of options. Specifically, RCII's top three open interest positions are the October, November, and December 12.50 puts, with a collective 6,363 contracts in residence. Suffice it to say, "vanilla" bears who purchased these puts -- which are now easily in the money -- are sitting pretty.

Turning elsewhere on Wall Street, short sellers are also likely in celebration mode. Rent-A-Center Inc (NASDAQ:RCII) short interest rose 19.2% in the last two reporting periods, and now accounts for almost 15% of its total float. At the stock's average trading pace, it would take more than three weeks to buy back these bearish bets.

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