Pacific Sunwear of California is facing a bevy of mixed news,
but investors apparently want to own the stock.
optionMONSTER's tracking systems detected the sale of about 2,200
June 5 puts on the teen retailer for $0.65. The activity was heavy
for a relatively obscure name in option trading, with the total
number of contracts Friday exceeding the daily average by 15
Put selling reflects a willingness to buy a stock at lower prices
and the belief that significant downside is limited. Friday's
trades come after several sessions recently where PSUN snapped back
from losses, which also suggests a constituency of traders are
looking to own the stock. (See our Education section)
It might be related to heavy short interest, which totaled 26
percent of the float at the end of last month. If the stock rises
further, short sellers may be forced to buy it back aggressively,
which would potentially drive it even higher.
PSUN ended the session up 0.17 percent to $5.75. It more than
doubled between July and early December, then fell sharply and now
appears to be finding support around $5.50 (dark orange line on
The company reported better-than-expected results on Nov. 22, with
the loss narrower than forecast and revenue strong. Management also
said sales trends were improving--especially for women's apparel.
However, it predicted a weak fourth quarter, with same-store sales
dropping as much as 5 percent. The shares dropped briefly on that
report but then continued to rally last month, which also suggests
that PSUN is in the midst of a potential short squeeze.
(Chart courtesy of tradeMONSTER)