Wayfair Inc's (W) Post-Earnings Plunge Draws Rare Batch of Put Players

Wayfair Inc (W) dropped to an annual low after the retailer's current-quarter outlook disappointed

Nov 8, 2016 at 2:18 PM
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Shares of Wayfair Inc (NYSE:W) are suffering a major slide on the charts today, following the online retailer's third-quarter earnings report. While the company's per-share loss was slimmer than forecast and revenue beat analysts' expectations, the current-quarter outlook disappointed. As a result, W stock has given up 11.9% to trade at $29.64, and earlier tapped a new annual low at $27.60. With the W seated on the short-sale restricted list, action is heating up in the stock's options pits.

Jumping right in, W puts are crossing the tape at five times the expected intraday rate -- with 4,890 contracts traded -- comfortably outpacing the 3,052 calls on the tape. In fact, put volume is running in the 98th percentile of its annual range. Most active so far is the November 29 put, though it's unclear whether new positions are being bought or sold here.

In any case, the longer-term trend in W's options pits has been toward calls. W's 50-day call/put volume ratio of 2.01 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits just 8 percentage points from a 12-month high. Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.68 -- in the bottom third of the past year's readings -- shows a heavy call-skew among options set to expire in the next three months.

Outside of the options pits, however, W has seen plenty of pessimism. For instance, short interest currently accounts for over 37% of the stock's available float. At W's typical pace of trading, it would take nearly 12 sessions to cover all these bearish bets. Plus, this elevated short interest also suggests that recent out-of-the-money call buyers may have been W short sellers using options to hedge their bearish bets.

The analyst community isn't particularly impressed with W, either. Of 16 brokerage firms following the stock, 10 rate it a lukewarm "hold." Still, with no "sell" recommendations on the books, future downgrades are a real possibility. Plus, the average 12-month price target of $48.67 sits at a significant premium to current levels. Should analysts begin to lower their outlooks on W, the shares could come under even more pressure.

From a technical point of view, Wayfair Inc (NYSE:W) has been a bit of a roller coaster this year, with the shares frequently chopping higher and lower. All in all, the stock has shed more than 37% of its value in 2016 -- perhaps to the delight of at least one well-known short. And more trouble could be ahead of W, as today's slide has the stock on below the $32 level -- which has limited several of the stock's major pullbacks -- and on track to close at its lowest point since June 2, 2015.

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