Amdocs Put Volume Soars on Spruce Point Report

The report detailed several signs of "accounting shenanigans" for DOX

Jan 23, 2019 at 10:47 AM
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The shares of Amdocs Limited (NASDAQ:DOX) are getting crushed this morning, after short seller Spruce Point Capital Management weighed in on the software concern. Specifically, the firm sees up to 50% downside risk in DOX shares, calling them a "strong sell" due to shady financials and accounting practices. The report claims Amdocs "has engineered superficial top and bottom-line growth," and details several indicators of "high level accounting shenanigans." Against this backdrop, DOX put options are flying off the shelves at a rapid-fire rate.

DOX stock was last seen 6.6% lower to trade at $56.46, and earlier touched a new two-year low of $54.90. The shares have been in a channel of lower highs and lows since grazing the $70 level in June, and today are pacing for their worst session since November 2015.

Within the first hour of trading, Amdocs has already seen nearly 7,500 puts cross the tape -- a whopping 177 times the average morning clip, and far eclipsing the previous annual daily high of just 1,626 puts traded on Oct. 5. For comparison, fewer than 200 DOX calls have crossed the tape so far today.

Most of the action has transpired at the February 50 and 55 puts, which has seen a mix of buyer- and seller-driven volume. Buyers of the puts expect DOX shares to sink beneath the strikes by the close on Friday, Feb. 15, when front-month options expire. Traders selling to open the puts expect the stock to stay north of the strikes through that time frame -- which also encompasses Amdocs' expected earnings release on Feb. 5 -- at which point they can retain the entire premium received from the sale.

Even before today, short-term options traders were more put-heavy than usual on DOX. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.36 indicates put open interest exceeds call open interest among options expiring within three months. This ratio registers in the 97th percentile of its annual range, suggesting near-term traders have rarely been more put-biased in the past year.

 

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