Sirius XM Radio Inc
) spiked 1.8% higher yesterday after the Internet radio provider
announced that its Board of Directors approved an additional $2
stock repurchase program
. Still, put activity on SIRI ramped up to nearly three times its
average daily norm. By contrast, overall call volume came in much
lower than usual.
Most popular by a long shot was the November 3.50 put --
representing a change of pace from Wednesday, when
short-term calls dominated
SIRI's options pits. Specifically, 6,066 contracts -- including two
large blocks -- changed hands for a volume-weighted average price
(VWAP) of $0.05. The lion's share of yesterday's contracts went off
at the ask price, while open interest saw 5,583 positions added
overnight, indicating fresh long put positions.
On the charts, SIRI has tacked on 43.4% over the past year, and hit
a six-year high of $4.00 on October 8. With this in mind, the put
buyers may be options traders betting on an end to the stock's
technical reign, nut could also be shareholders
insuring their positions
against a potential pullback. Specifically -- while Wednesday's
short-term call buyers expect SIRI to hold its ground ahead of its
earnings report on October 24 -- yesterday's put players are
gambling on a post-earnings dip for the stock.
Whatever the motive, these puts won't turn a profit unless SIRI --
perched at $3.93 -- slides beneath the breakeven rail of $3.45
(strike price minus the VWAP) by the close on November 15, when
back-month options expire. Right now, chances of the put moving
into the money during its lifetime are currently 1-in-6, as its
delta rests at negative 0.17.
On that note, should Sirius XM Radio Inc remain atop the 3.50
strike upon expiration, the most yesterday's put buyers stand to
lose is the initial premium paid.
This article by
was originally published on
Schaeffer's Investment Research
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