Options Traders Blast Sinking Longfin Stock

LFIN options volume hit a record high last Thursday

Apr 3, 2018 at 11:27 AM
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Options volume is soaring on Longfin Corp (NASDAQ:LFIN) today, as the shares extend their sell-off to a sixth straight day. At last check, more than 13,600 puts and almost 8,300 calls had traded -- nine times what's typically seen at this point in the day. For the sake of comparison, LFIN's single-day options volume topped out at a record peak of 25,253 contracts last Thursday.

The April 2.50 put is most active so far, with 5,881 contracts on the tape. It looks like traders may be selling to open new positions here, echoing similar activity in Monday's session. While some speculators may be hoping LFIN holds above the strike through expiration at the close on Friday, April 20, it's likely most of the activity at this deep out-of-the-money strike is due to those hoping to profit on a volatility crush.

Implied volatility at call option has jumped nearly 26% today to 661.8%. More broadly, short-term implied volatilities are the highest they've been since LFIN stock began trading back in mid-December. The equity's 30-day at-the-money implied volatility hit an all-time peak earlier, and was last seen docked at 266.5% -- meaning elevated volatility expectations are being priced into short-term options.

Looking at the charts, LFIN stock has been sliding since topping out at a near-term high of $74.50 on March 23. Sparking the sell-off was a scathing tweet from Citron Research, which called the Longfin a "pure stock scheme," which sent the shares down nearly 76% last week. They have shed another 32.2% this week -- including today's 17.5% slide to trade at $11.80 -- after the financial services company disclosed a Securities and Exchange Commission (SEC) investigation, with the regulatory agency requesting documents related to Longfin's initial public offering (IPO) and purchase of blockchain-powered micro lender Ziddu.com.

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