Stitch Fix Bears Pile On Ahead of Earnings

SFIX's weekly 12/13 23-strike put is popular today

Dec 6, 2019 at 2:11 PM
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Options volume is running hot on Stitch Fix Inc (NASDAQ:SFIX), as the retailer prepares to report earnings after the stock market closes next Monday, Dec. 9. With a little under two hours left in today's trading, around 7,000 puts and 5,400 calls have changed hands on SFIX -- three times what's typically seen at this point, and volume pacing in the 92nd annual percentile.

The weekly 12/13 23-strike put is seeing a lot of activity, and it looks like new positions are being purchased here for a volume-weighted average price of $2.18. If this is the case, breakeven for the put buyers at the close next Friday, Dec. 13, is $20.82 (strike less premium paid). Profit will accumulate on a move below this price point, while losses are limited to the initial premium paid, should SFIX stay above the strike through expiration.

Widening the scope suggests options traders have been more bearish than usual toward Stitch Fix. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.76 ranks in the 81st annual percentile. So, while calls have outpaced puts on an absolute basis, the rate of put buying relative to call buying has been accelerated.

This skepticism is seen outside of the options pits, too, where half of the analysts in coverage maintain a lukewarm "hold" rating on the stock. Plus, nearly 50% of the Stitch Fix's available float is controlled by short sellers. It would take shorts almost two weeks to cover their bearish bets, at the average pace of trading.

Looking at the charts, the stock's been recovering since slipping beneath $17 in early October -- its lowest point since Jan. 3 -- up 38.8% to trade at $23.58. However, Stitch Fix's 160-day moving average has kept a tight lid on the shares so far this month, and is containing today's upside move.

sfix stock daily price chart on dec 6


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