ViewRay Option Bear Makes Millions Overnight

VRAY stock is plummeting after earnings, and one trader could cash in

by Andrea Kramer

Published on Aug 9, 2019 at 11:42 AM

The shares of ViewRay (NASDAQ:VRAY) are getting destroyed today, after the radiation therapy concern reported a steeper-than-expected quarterly loss and cut its full-year sales guidance. The firm also announced the departure of CFO Ajay Bansal. At last check, VRAY stock was down 55.5% at $3.00 -- and it looks like one options trader placed a well-timed bearish bet on the shares yesterday.

ViewRay shares are pacing for their worst session ever, and earlier fell to a new two-year low of $2.89. VRAY stock is also set to end well south of recent support in the $6.50 region, which contained an early May pullback. However, the equity has been in a free-fall since skimming the $9.75 level on July 23, and just yesterday snapped a six-day losing streak.

VRAY stock chart aug 9

As alluded to earlier, VRAY options were hot yesterday, with about 11,000 puts traded -- 35 times the average daily volume, and representing a new annual high. Calls also ran hotter than usual, with 3,750 traded -- 26 times the norm.

Most popular was the August 6 put, which saw close to 11,000 contracts change hands -- nearly all of which translated into new positions. In fact, just minutes before yesterday's closing bell, one trader bought to open a block of 10,000 August 6 puts for $0.30 each, or $300,000 total (premium paid x number of contracts x 100 shares per contract). The speculator would make money if VRAY shares fell below $5.70 (strike minus premium paid) by the close on Friday, Aug. 16, when front-month options expire.

Those puts are now deep in the money. Specifically, the puts were last bid at $2.95. If yesterday's buyer were to cash out now, their position would be worth a cool $2.95 million ($2.95 x 10,000 contracts x 100 shares per contract). And even subtracting the $300,000 paid to buy the puts, the trader would still make a cool profit of 883%!

Outside of the options pits, VRAY could be vulnerable to more analyst backlash. Already this morning, Guggenheim and Mizuho cut their price targets on the equity to $8 and $9, respectively. Still, the consensus 12-month price target of $9.90 represents a premium of 239% to VRAY's current price. In addition, seven of the eight analysts following the shares had "strong buy" opinions ahead of earnings.

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