Put Trading Picks Up as JD.com Stock Sinks

JD.com has shed one-third of its value in just three months

Sep 5, 2018 at 1:25 PM
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JD.com, Inc. (NASDAQ:JD) has been disappointing investors all year, and things have just taken a turn for the worse. The stock is down 8.4% at $26.97, trading at its lowest levels since early 2017, on news the company's CEO Richard Liu was arrested in recent days on rape allegations. Mr. Liu has denied any wrongdoing and has been released without bail. Meanwhile, the shares of the e-commerce giant have now shed more than one-third of their value in just the past three months, and bearish traders are beginning to appear in the options pits.

Specifically, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 0.64. While this still shows call buying has topped put buying on an absolute basis, the reading's annual percentile rank of 95% shows this level of interest in put buying relative to call buying is quite unusual.

In today's trading, both calls and puts are flying off the shelves, with total options volume hitting fresh annual highs. Most popular overall is the September 29 call, where new positions are being opened. Of course, this increased attention has driven up near-term volatility expectations, with JD.com's 30-day at-the-money implied volatility (IV) jumping to 45.8%, good enough for the 97th annual percentile.

We'll see if any bullish analysts begin to lose faith and downgrade the stock, especially with the average 12-month price target standing up at $41.54 -- a 54% premium to current levels. If nothing else, JD's 14-day Relative Strength Index (RSI) suggests a short-term bounce is near, as this reading sits well into oversold territory, coming in at 20.78.

jd stock chart

 

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