Momo Inc (MOMO) Options Heat Up as Stock Cools Post-Earnings

Momo Inc (MOMO) options are trading at a blistering pace

Nov 8, 2016 at 11:54 AM
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Social network Momo Inc (ADR) (NASDAQ:MOMO) is among several stocks getting clobbered after earnings. After earlier racing to a record high of $28.44 -- thanks to the company's quarterly results, which came in above estimates -- the shares inexplicably reversed lower. MOMO was last seen down 11.3% at $23.71 and short-sale restricted, with both stock and options volume running in their respective 100th annual percentiles.

Looking more closely at the options action, both puts and calls are being exchanged at five times the usual intraday rate. On an absolute basis, puts hold a narrow edge over calls, and the most active put is the December 22.50 strike. Several signs suggest traders are buying to open positions here, anticipating MOMO will breach $22.50 by December expiration.

Taking a step back, puts have been the options of choice among traders in recent weeks. While MOMO's 10-day put/call volume ratio of 0.62 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is call-heavy on an absolute basis, it ranks above four-fifths of all readings from the prior year. In other words, relatively speaking, speculators have been purchasing puts over calls at a quicker-than-usual clip.

Now appears to be a good time to purchase premium on short-term options, too. The stock's Schaeffer's Volatility Scorecard (SVS) checks in at a high 88, suggesting MOMO has tended to make bigger moves than the options market has priced in over the past year.

As mentioned previously, despite Momo Inc's (ADR) (NASDAQ:MOMO) reversal lower, the stock managed to hit an all-time high early on. It's also worth noting that, in spite of the intraday deficit, the shares have still easily outperformed the market over the long haul. Year-to-date, MOMO stock has flown 48% higher.

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