Put Activity Picks Up On Etsy

The shares recently bounced near the popular 40 strike

Oct 24, 2018 at 12:55 PM
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When we checked in on Etsy Inc (NASDAQ:ETSY) earlier this month, call buying was in vogue, but the activity has slowed down considerably since then. In fact, the e-commerce name's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has risen to 0.86, up from just 0.52 two weeks ago. What's more, this ratio ranks in the 94th annual percentile, showing such demand for long puts has been rare on ETSY.

While this options activity on Etsy is certainly interesting, it's worth noting that a decent chunk of the action took place at the now-expired October 40 put. The 40-strike put is again popular in the November series, but data shows mostly sell-to-open activity here. In fact, this is the most popular contract again today.

Further confirming the unusual put trading on the stock is the Schaeffer's put/call open interest ratio (SOIR) of 1.55. This put-skewed reading of near-term open interest ranks in the 96th annual percentile.

It's interesting to see how the $40 area acted as a technical floor a few weeks back, just as some options traders had anticipated by selling to open the contracts. Also in this region is the 160-day moving average, which acted as a strong back in February.

etsy stock chart

The stock is gaining today despite the broad-market headwinds thanks to upbeat analyst attention. Morgan Stanley upgraded Etsy shares to "equal weight" from "underweight" and hiked its price target to $48 from $36, saying they underestimated the company. They added that Etsy shows sustained growth and it's hard to see it underperforming. The shares were last seen trading up 1.6% at $43.35.

Finally it's worth noting that the security's rise on the charts -- up 174% in the past year -- comes despite rising short interest levels. In the last reporting period, short interest on ETSY increased by 17.4%. This puts more than 7% of the float in short sellers' hands.

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