Dollar Tree Calls Flying Off the Shelves

One traders seems to have bought 4,500 call contracts

Deputy Editor
Nov 22, 2022 at 12:47 PM
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Options traders are taking an interest in Dollar Tree, Inc. (NASDAQ:DLTR), which is down 9.6% to trade at $149.40 following its third-quarter earnings report. Dollar Tree reported earnings and revenue that beat analysts' forecasts, and hiked its full-year sales outlook; however, the discount retailer also said its anticipates full-year earnings to finish toward the lower half of its previous guidance, with pressure from elevated costs and shifting consumer purchases.

The increase in options activity is significant. At the session's halfway point, more than 23,000 calls and 13,000 puts have been exchanged, which is seven times the intraday average. The most popular position by far is the February 195 call. An even deeper dive attributes this activity to a single trader, who bought 4,500 contracts at a volume weighted average price (VWAP) of 59 cents per share.

A slightly longer-term look shows there's been a particular penchant for puts of late. Dollar Tree stock's Schaeffer's put/call open interest ratio (SOIR) of 2.20 stands higher than all other readings from the past 12 months. In other words, short-term options traders have never been more put-biased. Echoing this, at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1.03 DLTR puts have been picked up for every call during the past two weeks. This ratio sits higher than 74% of readings from the past year. 

Analysts have yet to weigh in after the company's report, but they're nearly evenly split at the moment. Currently, nine rate Dollar Tree stock a "strong buy," while seven say "hold," and one says "sell." Meanwhile, the average 12-month price target of $166.55 is a healthy 11.6% premium to current levels.

On the charts, the $147 level and 60-day moving average caught today's pullback. The shares were previously rallying from a mid-August, post-earning bear gap below the $150 region. Still, despite the drop, DLTR remains up 6% and 12.4% year-to-date and year-over-year, respectively.

DLTR Chart November 222022


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