Harley-Davidson Puts Popular Amid War With Trump

HOG plans to move some operations out of the U.S. due to tariffs

Jun 26, 2018 at 10:16 AM
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The shares of Harley-Davidson Inc (NYSE:HOG) are down another 1.7% to trade at $40.87 this morning. HOG stock yesterday suffered its worst trading session since Jan. 30, dropping 6% after the motorcycle maker said it would move production of bikes bound for the European Union (EU) to outside the U.S., in the wake of the recent tariff wars. Today, meanwhile, President Donald Trump warned that Harley -- which already estimated it would eat $90 million to $100 million a year due to tariffs -- would be "taxed like never before" if it makes such a move, and said it "will be the beginning of the end" for the company.

HOG stock is now set for its worst week since the early February stock market correction -- and it's only Tuesday. However, the equity's recent run-in with its 160-day moving average may have foreshadowed the sell-off. Specifically, Harley-Davidson shares recently came within one standard deviation of their 160-day moving average, after a lengthy stretch below this trendline. There have been eight similar run-ins in the past, after which HOG was lower one month later 86% of the time, and averaged a loss of 6.67%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

As HOG shares sold off yesterday, put options crossed the tape at six times the average daily pace, with more than 11,000 exchanged. It looks like some bears bought to open the July 42 put, which saw the biggest increase in open interest overnight. This morning, Harley puts are trading at eight times the average intraday pace, with nearly 3,000 contracts exchanged so far, compared to fewer than 1,000 calls. Most popular is the August 40 put.

Elsewhere, quite a few short sellers are likely cheering HOG's tariff troubles. Short interest represents more than 10% of the equity's total available float, or about 11 days of trading, at the stock's average volume.


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