Fossil Stock Put Volume Explodes as Losing Streak Widens

Bearish options betting is picking up on Fossil, ahead of next week's earnings event

Nov 3, 2017 at 2:03 PM
facebook twitter linkedin


Shares of Fossil Group Inc (NASDAQ:FOSL) have plunged 4.1% today to trade at $7.42, after Telsey Advisory Group lowered its price target on the retail stock to $9 form $11. What's more, FOSL is pacing toward its seventh loss in a row -- one of the longest losing streaks of all optionable S&P 500 Index (SPX) stocks, according to Schaeffer's Senior Quantitative Analyst Rocky White -- and with earnings right around the corner, options traders are bracing for even more downside.

At last check, 13,137 puts had traded on Fossil stock -- 32 times what's typically seen at this point in the day, and volume on track to settle in the 99th annual percentile. By contrast, fewer than 650 calls are on the tape, though this still represents two times the expected intraday amount.

The bulk of the action has centered at the 6-strike put in both the December and January 2018 series, likely at the hands of one trader rolling her bearish bet out one month. If this is the case, the speculator is giving Fossil shares a little more time to sink below $6 -- a level not breached since October 2000.

Elsewhere, shorter-term traders appear to be purchasing new positions at the November 7 put. In this case, they expect FOSL stock to drop south of $7 by the close on Friday, Nov. 17 -- a time frame that includes the retailer's third-quarter earnings report, due after the close next Tuesday, Nov. 7.

History is certainly on the side of these options bears. In the past eight quarters, Fossil stock has closed lower in the session subsequent to the company's earnings report five times -- including double-digit percentage declines after the three most recent showings. This time around, the options market is pricing in a single-session post-earnings swing of 21.7% for FOSL, regardless of direction, per at-the-money implied volatility data.

Another move big tumble wouldn't be too surprising, either, considering FOSL's current momentum is to the downside. In addition to its lengthy losing streak, the stock is down 71.3% year-to-date. And while the shares have come off their Aug. 22 15-year low of $6.80, they've been continued to run into resistance in the $9.50 neighborhood -- home to their early August post-earnings bear gap highs.

 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Stock Pick Report
 


 


 
Special Offers from Schaeffer's Trading Partners