By Josh Selway / September 19, 2017 / www.schaeffersresearch.com /
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Toy stocks Hasbro, Inc. (NASDAQ:HAS) and Mattel, Inc. (NASDAQ:MAT) came under pressure on Monday due to speculation -- which has since been confirmed -- that Toys R Us was filing for Chapter 11 bankruptcy. Options traders quickly jumped in, targeting near-term puts amid the shares' weakness. Below we'll take a quick look at how speculators are trading HAS and MAT.
Put Options Unusually Popular as HAS Trades Below 200-Day
Put volume on Hasbro finished at three times the expected rate yesterday, with the contracts outpacing calls 3,514 to 985. Most popular was the January 2018 95-strike put, where it looks like some traders were closing positions amid the pullback. Next up was the weekly 9/29 95-strike put, and data points to buy-to-open activity. These bears would be eyeing an extended move below $95 from the security through next Friday's close, when the contracts expire.
In today's action, puts are again active, but this appears to mostly be the result of heavy closing action at the October 95 put, with the stock dipping as low as $92.91 earlier today. This contract ranks second in open interest among all HAS options, following only the aforementioned January 95 put.
Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows how strong the put bias has become among the equity's speculators. Specifically, Hasbro has a 10-day put/call volume ratio of 3.85 across these exchanges, which ranks in the bearish 91st annual percentile. Put open interest now stands at 15,735 contracts, in the 94th annual percentile.
A quick look at the charts shows HAS shares are up nearly 23% year-over-year to trade at $94.92, including a 1.8% bounce today. However, the equity has pulled back significantly since peaking at $116.20 on July 21, and has been trading below its 200-day moving average for over a month. Making matters worse, the security has historically underperformed in September, dropping 1.5% on average, and finishing higher just 41% of the time.
Options Bears, Short Sellers Hit Mattel Stock
Mattel's chart has been even grimmer. The shares have shed more than half their value during the past 52 weeks, touching an eight-year low of $14.83 earlier today -- though they were last seen 1.5% higher at $15.10. MAT tends to underperform in September like its sector peer, giving back an average of 1.2% on the month, and closing positive just 39% of the time.
It would seem options traders have been betting on more downside. In yesterday's session, puts traded at seven times the expected pace, thanks to heavy interest in the October 15 put. This strike is now home to peak open interest of 14,771 contracts on MAT, and those buying to open positions expect the stock to fall back below $15 by the close on Friday, Oct. 20, when front-month options expire.
While put open interest is docked at an annual high of 54,915 contracts, put volume is accelerated again today -- running at seven times what's typically seen. This appears to be from heavy closing activity at the weekly 10/13 15-strike put, with those selling the options taking advantage of elevated short-term volatility expectations. The security's 30-day at-the-money implied volatility of 38% ranks in the 96th annual percentile.
Options traders aren't the only ones betting against Mattel stock, though.
Short interest on the shares has risen significantly, including a 45% jump in the last two reporting periods. These bears now control 12.6% of the equity's float, or 8.6 days' worth of buying power, based on average daily volumes.