Match Group Stock Sell-off Draws Heavy Options Trading

Match Group will report earnings next week

May 2, 2018 at 2:12 PM
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Shares of online dating specialist Match Group Inc (NASDAQ:MTCH) had their worst day ever yesterday, shedding 22.1% on news that Facebook (FB) was launching new dating services. MTCH stock is down another 3.7% today at $35.34, with a downgrade at Jefferies to "hold" from "buy" rubbing salt in the proverbial wounds. The brokerage firm also slashed its price target to $40 from $50. All the while, options volume has been surging.

In yesterday's session, options volume hit a 52-week high, with calls nearly doubling puts. Spread activity looks likely at the 40- and 45-strike calls, which saw unusual activity in the May and June series, and new positions were also opened at the May 33, 35, and 40 puts. As for today's trading, the May 40 call appears to be seeing sell-to-open activity, suggesting traders expect the stock to move back atop $40 in the coming weeks.

Anyone speculating on MTCH needs to be careful, however. The company is scheduled to report earnings after the close next Tuesday, May 8, suggesting another big move could be coming soon. Looking back, the shares have jumped 8.3% and 10% the day after earnings in the past two quarters. Overall, March Group has moved 7.9% on average the day after earnings during the past two years, regardless of direction. The options market is pricing in a much larger 17% swing this time around, based on implied volatility data.

Elsewhere, short interest remains near record levels on the equity, despite a small decline in the last two reporting periods. In fact, short interest represents more than half the security's total float. Going by average daily volumes, it'd take short sellers almost 17 days to cover their positions.



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