Options Bears Dig In After GrubHub Denies Sale Reports

GrubHub has denied it is pursuing strategic options

by Patrick Martin

Published on Jan 10, 2020 at 10:31 AM
Updated on Jun 24, 2020 at 10:16 AM

One of the worst stocks on the New York Stock Exchange (NYSE) this morning is GrubHub Inc (NYSE:GRUB). The meal delivery app is down 7% to trade at $51.80, after the company denied a Wall Street Journal report that a sale of the company is in process, or that any strategic review is underway. More specifically, a GrubHub spokesperson clarified: "We felt it was important to clarify that there is unequivocally no process in place to sell the company and there are currently no plans to do so."

GrubHub stock gapped higher by 12.6% on Wednesday when the news of a possible sale first hit. That rally and yesterday's 1.8% pop ran GRUB headfirst into its 160-day moving average, a trendline not toppled since a late-July earnings-induced bear gap. Plus, the shares yesterday closed in "overbought" territory with a 14-day Relative Strength Index (RSI) of 75. This suggests a short-term sell-off may have already been in the cards for GRUB. 

There's pessimism everywhere you look surrounding the equity. Almost 21% of GRUB's total available float is sold short, and 18 of 24 brokerages in coverage dole out "hold" or worse ratings.

Options traders are getting in on the action early today. Already, more than 3,000 puts have changed hands, seven times the average intraday amount. The February 45 put is the most popular, and there are also new positions being opened at the weekly 1/10 50-strike put. Those options traders are targeting more losses for GRUB by the time the contracts expire at the end of the day today.

Now is certainly the time to pursue options too, considering the security's Schaeffer's Volatility Index (SVI) of 55% sits in the 19th percentile of its annual range. In simpler terms, options players are pricing in relatively low volatility expectations right now.


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