Michael Kors Holdings Ltd
) 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
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 (
), 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
speculating on a downturn from the high-end
retailer, or simply
their long stock positions?
This article by Alex Eppstein was originally published on
Schaeffer's Investment Research
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