Trading on Michael Kors Holdings Ltd
(NYSE:KORS) is skewed in a strongly bearish direction this morning. Puts are being exchanged at more than four times their usual rate, and outnumber calls at a ratio of more than 3-to-1.
Attracting the most attention is the June 57.50 put, where over 5,200 contracts have crossed the tape -- 96% at the ask price. The latter statistic -- considered alongside the fact that implied volatility is up by over 4 percentage points -- suggests that the puts are being newly minted.
The volume-weighted average price (VWAP) for the puts is $2.46, meaning that the shares of KORS -- which are currently priced at $61.27 -- must descend to $55.04 (strike price minus VWAP) prior to June 21, when front-month options expire. If they do not, however, the most today's traders have at stake is the premium paid at initiation.
This morning's bearish attitude toward Michael Kors Holdings is part of a pattern in the options world. The company's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day put/call volume ratio is 0.97, which places in the 78th percentile of like readings taken over the past year. Long story short, puts are being scooped up over calls at a faster-than-usual clip.
By contrast, analysts have a positive posture toward KORS, with nine of 10 chiming in with "buy" or better endorsements -- not including the "buy" rating issued by Canaccord Genuity this morning. Plus, the consensus 12-month price target of $73 represents a premium of more than 19% to the stock's current perch.
That sentiment is mixed toward KORS is confounding. The stock has tacked on nearly 20% in 2013, and more than 60% over the past year. Furthermore, the stock boasts support from its 10-day moving average, which contained a pullback just last Thursday.
All of this begs the question: Are today's out-of-the-money put buyers really speculating on a downturn from the high-end retailer, or simply protecting
their long stock positions?
This article by Alex Eppstein was originally published on Schaeffer's Investment Research.
Below, find some more great content from Schaeffer's Investment Research:
Daily Game Plan – Metals Rip Higher
Bulls Rally Behind Arch Coal Inc's (ACI) Recent Turnaround
Trader Hopes Tiffany & Co.'s (TIF) Luster Tarnishes
No positions in stocks mentioned.