Fossil Call Volume Spikes on Google Agreement

Call volume on Fossil has blown past the daily average

by Josh Selway

Published on Jan 17, 2019 at 2:35 PM

The shares of Fossil Group Inc (NASDAQ:FOSL) are higher this afternoon amid heavy trading volumes, after the company inked a deal to sell $40 million worth of smartwatch technology to Alphabet's (GOOGL) Google. What's more, FOSL call options are flying off the shelves today, with traders opening positions at a number of different strikes.

For example, eleventh-hour buyers are hitting up the January 2019 series, which expires tomorrow. The 18-, 18.50-, 19-, and 19.50-strike calls from the series are all seeing notable activity, with the 19 calls standing as the most popular overall. Anyone buying these contracts to  open would be betting on Fossil stock extending its run higher before the close tomorrow. Overall, more than FOSL 6,200 calls have traded so far, compared to an average daily volume of just 669.

This preference for calls runs counter to what's been seen recently from options traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The security's 10-day put/call volume ratio across these exchanges comes in at 1.70, a reading that ranks in the top quartile of its annual range. This points to a healthier-than-usual appetite for bearish bets of late.

Pessimism runs high outside the options pits, too, evidenced by elevated short interest levels. In fact, short interest represents almost 30% of FOSL's float, and going by average daily trading volumes, it would take these bears almost two weeks to cover their positions. As such, quite a few shorts were probably spooked by Fossil's Google deal.

It's hard to blame anyone for being bearish on the accessories maker, given its steady grind lower on the charts since a June peak near $32. And while the shares recently bounced from the $14 region -- the site of their giant bull gap from last February -- they'll need to overcome their 80-day moving average, which acted as a ceiling once again today. At last check, Fossil was trading up 3.5% at $18.02.

fosl stock chart


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