Options Bears Pounce as Overstock Sells Off

Put volume has spiked during OSTK's sell-off today

by Patrick Martin

Published on Feb 11, 2019 at 3:03 PM

Near the bottom of the Nasdaq today sits Overstock.com Inc (NASDAQ:OSTK), down 9.6% to trade at $18.39.  Although there's no clear catalyst for today's price action, blockchain stocks in general are lower across the board. Whatever the reason, options bears have come of the woodwork today in droves.

More specifically, almost 5,700 OSTK put options have changed hands today -- nearly double the average intraday amount. Leading the charge is the February 17 put, where it looks like new positions are being purchased for a volume-weighted average price of $0.31. If this is the case, breakeven for the put buyers at the close this Friday, Feb. 15, when the options expire is $16.69 (strike less premium paid).

On the charts, OSTK bottomed at a two-year low of $12.33 on Dec.19. And while the shares have added 35.6% year-to-date -- thanks in part to a positive reaction to the company's new security token trading platform -- the upside is being stymied by their 100-day moving average.

Daily Stock Chart OSTK

Despite its overall success in 2019, the stock remains a favorite among short sellers. The 12.68 million shares sold short is a record high, and represents a whopping 56% of OSTK's total available float, or 10.6 times the average daily trading volume. 

As far as options are concerned, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.87 ranks in the 96th annual percentile, meaning short-term speculators are more put-heavy than usual toward OSTK. Further, the March 15 put is home to one of the stock's top open interest positions, with nearly 14,000 contracts outstanding.

According to the equity's Schaeffer's Volatility Scorecard (SVS) -- which sits at a low 5 out of a possible 100 -- OSTK has tended to make smaller moves, relative to what the options market has priced in over the past year. This has made the shares an attractive target for premium sellers.

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