Shopify Stock Sells Off After Citron Highlights 'Major Facebook Problem'

Put options have been unusually popular on Shopify

Mar 26, 2018 at 11:50 AM
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Shopify Inc (NYSE:SHOP) is plummeting today, last seen down 5.8% at $133.40, after Citron Research released a report detailing the company's reliance on Facebook data. Citron believes the stock should trade back down at $100, as it believes Facebook will soon begin restricting the data it relies on -- describing it as a "major Facebook problem" in a tweet this morning. As such, put volume is surging on SHOP stock.

So far today more than 11,000 put options have traded, compared to an average daily volume of just 3,800. Traders appear to be deploying some sort of spread strategy using the weekly 3/29 141- and 142-strike puts. The May 130 put is also popular, and traders are likely buying to open positions to bet on a breach of the $130 level. Overall, SHOP's single-day put/call ratio has jumped to 3.13, showing more than three puts have traded for every call.

Puts were unusually popular even before today's Citron news, based on Shopify's 10-day put/call volume ratio of 3.99 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This read ranks just 1 percentage point from an annual high, indicating a very strong demand for put buying in recent weeks.

Despite the big drop today, the equity remains up almost 93% during the past year, touching an all-time high of $154.82 less than a week ago. Plus, Shopify stock may be finding support at the 50-day moving average, located just below its current perch. The shares haven't closed below this trendline in 2018.


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