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Sony Corporation Bears Come Out of Hibernation


Bears bet on the decline of SNE.

Sony Corporation (NYSE:SNE) -- currently residing at $20.10 -- has tacked on a whopping 114.7% since hitting its 52-week low of $9.57 on December 5, leading to a heap of bullish betting in its options pits. Throughout the last 50 sessions, speculators have bought to open almost five calls for every put, according to the stock's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 50-day call/put volume ratio of 4.67. Moreover, this ratio ranks higher than 97% of other such readings taken within the year, meaning speculators have snatched up calls over puts at a near-annual-high rate during the time frame.

Still, SNE experienced a change of pace in its options pits yesterday, as 9,137 puts -- two times the daily norm -- changed hands, compared to only 5,404 calls. Much of this traffic passed through at the July 20 put, where 3,601 contracts crossed for a volume-weighted average price (VWAP) of $0.87. Almost all of the contracts went off at the ask price, and open interest added 2,443 positions over night, pointing to heavy buy-to-open activity.

Yesterday's put buyers anticipate SNE will fall south of its 40-day moving average at $19.46, which has acted as nearly constant support since early December. Even more, these bearish speculators expect the stock to drop at least 7% to finish below the breakeven price of $19.13 (strike price less the VWAP) by July 19, when back-month options expire. If SNE instead lingers above the 20 strike, the most yesterday's put buyers stand to lose is the initial premium paid per contract.

Stepping out of the options pits, analysts' consensus 12-month price target for SNE hovers at $25.62, which represents expected upside of 9.6% from the stock's 52-week high of $23.38. Should Sony Corporation tumble, as yesterday's call buyers anticipate, a round of price cuts could be in store, pushing the stock downward. Sony shares had popped higher in recent sessions, following reports of an increased investment from Daniel Loeb's hedge fund.

This article by Milissa Hudepohl was originally published on Schaeffer's Investment Research.

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