Options Bears Have Spent Months Betting Against Sprint Stock – Schaeffers Research

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In early August, Sprint Corp (NYSE:S) lost its footing atop its formerly supportive 200-day moving average, and the shares have been struggling since — a move only exacerbated by the telecom concern’s cancelled merger with T-Mobile (TMUS) in early November. Today, S stock is down 0.5% to trade at $5.76, and some options traders have been bracing for even bigger losses.

Taking a closer look at the charts shows Sprint stock has lost roughly 34% year-over-year, and fell to an annual low of $5.42 on Dec. 11. The shares have been guided lower by their descending 50-day moving average since late September. Furthermore, the equity has underperformed the broader S&P 500 Index (SPX) by almost 25 percentage points during the past three months. 

Near-term options traders are unusually put-biased toward Sprint, too. The equity’s Schaeffer’s put/call open interest ratio (SOIR) of 1.26 shows put open interest outweighs call open interest among options expiring within three months. This reading ranks in the 89th percentile of its annual range, pointing to a stronger-than-usual skew toward short-term puts over calls.

Most of this activity is centered at the January 2018 series, with the 5-, 5.50-, and 7-strike puts accounting for three of Sprint’s top five open interest positions. There are currently 235,421 contracts collectively outstanding at these three strikes — accounting for more than 45% of the stock’s total put open interest.

Data from Trade-Alert indicates the bulk of these positions were opened months ago — and as far back as last January in the case of the 5-strike puts. Plus, it looks as if notable buy-to-open activity occurred at the January 2018 5- and 7-strike puts, meaning options traders were betting on Sprint to slump into the new year.

Short sellers are likely enjoying the telecom stock’s recent struggles, as well. Short interest accounts for 15.7% of Sprint’s total available float. At the equity’s average pace of trading, it would take shorts nearly six days to cover their bearish bets, though give Sprint stock’s technical troubles, these bearish bettors will probably stay put for the time being.