Option Bears Circle as Ubiquiti, MiMedx Stocks Tank

By Andrea Kramer / February 20, 2018 / www.schaeffersresearch.com / Article Link

Tech stock Ubiquiti Networks Inc (NASDAQ:UBNT) is tanking today, after the Securities and Exchange Commission (SEC) issued subpoenas to several officers, and requested accounting and trade documents. Last September, notable short-selling firm Citron Research called Ubiquiti a "total fraud," and compared its CEO to Bernie Madoff.

Meanwhile, biotech MiMedx Group Inc (NASDAQ:MDXG) is also in hot water, with the shares plummeting after the company said it's investigating allegations regarding sales and distribution practices. The firm also delayed its fourth-quarter and full-year results. Against this backdrop, UBNT and MDXG options are flying off the shelves this morning.

UBNT Options Buyers Expect More Downside

Ubiquiti Networks stock has gapped 26% lower to trade at $54.73 -- and back in territory last charted shortly after the aforementioned Citron allegations. Not even three weeks ago, UBNT stock -- like so many others -- was flirting with record highs, peaking at $82.30 on Jan. 29.

UBNT shares are now on the short-sale restricted (SSR) list, so bears are turning to the options pits instead. Within the first hour of trading, more than 3,300 UBNT put options have changed hands -- 14 times the norm for this point in the day. Most of the action has occurred at the January 2019 30-strike put, which is seeing apparent buy-to-open activity. By purchasing the puts to open, the traders expect Ubiquiti stock to extend its plunge and breach $30 -- in a neighborhood not explored since early 2016 -- by January 2019 options expiration.

Although UBNT is on the SSR list, there are plenty of shorts cheering today's decline. More than 31% of the stock's float is dedicated to short interest, representing nearly a month's worth of pent-up buying demand, at the equity's average pace of trading.

Options Traders Eye Single-Digit Territory for Struggling MDXG Stock

MiMedx Group stock has gapped 33.8% lower to trade at $9.56, set to breach its 320-day moving average for the first time in 2018. MDXG shares also touched an all-time high of $18.25 on Jan. 29, before the broad-market pullback.

Roughly 10,000 MDXG puts have traded so far today -- 10 times the norm, and nearly twice the number of call options traded. Most popular are the March 7.50 and 10 puts, the buyers of which expect the shares to extend today's drop and explore single-digit territory within the next month.

MDXG stock is also on the SSR list today, but has a slew of shorts already cheering. Short interest accounts for almost 40% of the security's total available float, and would take more than 18 sessions to buy back, at the stock's average pace of trading.

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