Puts Pop on GSX After Short Seller Slams Stock

Options volume is running in the top percentile of its annual range

Deputy Editor
Apr 14, 2020 at 11:53 AM
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A bearish note from short seller Citron Research has the shares of Chinese educational specialist GSX Techedu Inc (NYSE:GSX) down 4.3% at $30.06, after hitting a three-month low of $28.29 earlier this morning. Citron said in a tweet that it believes 70% of the firm's revenue is fabricated, and called for the stock to be halted and investigated.

The comments have brought plenty of options traders to the table today, with option volume running in the top percentile of its annual range. So far, 24,000 puts and 1,964 calls have crossed the tape -- nine times the intraday average. Most popular are the April 25 and 30 puts, with positions being opened at both contracts. This suggests these traders are betting on even more downside for GSX by the time these contracts expire this Friday. 

This penchant for puts has been the norm lately. In the past 10 days, 12,655 puts have exchanged hands, compared to just 3,575 calls. Echoing this, GSX sports a Schaeffer's put/call open interest ratio (SOIR) of 2.74, suggesting short-term options players are also favoring puts over calls right now. 

Meanwhile, short sellers have been hitting the exits, down 14.5% in the last two reporting periods. Despite the slide, the 12.35 million shares sold short represent a solid 14.8% of GSX's float, meaning bears are still in control. 

The brokerage bunch is surprisingly optimistic, considering the 27.5% drop GSX has already suffered this month, which could lead to even more bear notes. Of the five in coverage, four analysts say "strong buy" compared to just one "hold." Plus, the consensus 12-month price target of $44.82 is a hefty 49.3% premium to current levels. 

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