The short seller warns against trying to "catch a falling knife"
The shares of FleetCor Technologies, Inc. (NYSE:FLT) are lower today, after short seller Citron Research weighed in on the company. While this isn't the first time Citron has taken aim at FLT -- it called the fuel card provider a "predatory company" in April 2017 -- today's note has fueled crazy options volume on the shares.
More specifically, Citron today warned that downside for FLT stock "is massive," and that traders should exercise caution "trying to catch a falling knife." This is because the short seller claims FleetCor is "one of the largest clean energy frauds in U.S. history," and that its "egregious billing practices" are illegal.
FLT shares initially dropped as low as $237.09 on the Citron note, but have since pared their losses to 1.3% to trade at $248.43. The equity started 2019 very strong, and touched an all-time high of $276.89 as recently as May 22. Since then, however, FLT stock has surrendered support at its 20-day moving average, and is trading around a 23.6% Fibonacci retracement of the aforementioned rally off its late-December lows to its May closing high.
At last check, FleetCor has seen roughly 7,600 put options change hands -- 23 times its average intraday put volume. In fact, put volume is already at an annual high, topping the previous peak of roughly 4,700 contracts exchanged earlier this week, on June 4. Meanwhile, about 2,200 FLT calls have traded, which is eight times the norm.
Most active by a mile is the June 240 put, which has seen more than 2,200 contracts cross the tape -- much of which looks like buy-to-open activity. By purchasing the puts to open, the buyers expect FLT shares to retreat beneath $240 by the close on Friday, June 21, when front-month options expire.
Heading into today, FLT put open interest was already at an annual high of nearly 13,800 contracts. For the sake of comparison, total call open interest stands at just about 6,600 contracts -- in the middling 59th percentile of its annual range.
This reflects the growing appetite for bearish bets lately. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly 17 FLT puts for every call in the past two weeks. In fact, the 10-day put/call volume ratio of 16.69 is in the 96th percentile of its annual range, pointing to a bigger-than-usual penchant for long puts over calls of late.