Put Traders Blast Amazon's Latest Victim

LYV stock traded in a nearly 17% intraday range on Thursday

Aug 11, 2017 at 11:16 AM
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Shares of Live Nation Entertainment, Inc. (NYSE:LYV) gapped to a record high of $42.20 out of the gate on Thursday, after Ticketmaster parent's earnings report was met with price-target hikes from J.P. Morgan Securities (to $40) and Jefferies (to $42). However, reports that Amazon is considering throwing its hat in the event ticketing ring sent LYV stock plunging in afternoon trading -- and bearish betting ramping up in the equity's options pits.

Specifically, the headlines hit the newswires around 3:30 p.m., sending LYV shares spiraling to an intraday low of $36.11. The stock found a foothold near $36 -- home to its mid-June highs -- eventually settling at $39.61, up 5.6% on the day.

Options traders were quick to react to the Amazon news, with 7,922 contracts traded -- 18 times what's typically seen, and volume arriving at a new 52-week peak. Put volume also hit its highest point in 12 months, with 4,347 contracts traded, or 28 times the average daily amount. 

Most active was LYV's August 37 put, where 1,937 contracts traded -- the bulk of which translated into new open interest overnight. It looks as if there was a mix of buying and selling here. Those purchasing the calls are betting on the stock to breach the strike by next Friday's close -- when front-month options expire -- while those writing the calls expect this level to serve as a near-term floor. 

Today, LYV is trading down 1.8% at $38.90, but remains up 46.2% year-to-date. As such, those that bought the out-of-the-money puts yesterday may actually be shareholders using options to hedge against any downside risk.

Additionally, the stock's Schaeffer's Volatility Index (SVI) of 54% is docked in the 100th annual percentile, suggesting elevated volatility expectations are being priced into short-term LYV options. This could suggest that those selling the August 37 puts are actually hoping for a volatility crush over the next week.

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