Tuesday, December 8, 2009

HHGREGG INC (HGG) - Does History Repeat?

HGG is trading ~21.70 yielding a $600 million market cap. The company is a retailer of video products. The LIVEVOLTM Pro Summary is below.

The company averages 402 option contracts traded a day - today over 10,000 options have traded hands with 2 hours still to go in the trading day. 10,373 (99.4%) of the options were puts. Even further, 9,912 were the Jan 20 puts - mostly purchases (if not all). The Company Tab is included below as well as the largest trades for the day (all Jan 20 Puts). Click the images to enlarge them.

From the Options Tab snapshot below (click image to enlarge) we can see that the open interest (OI) in the Jan 20 Puts is just 104. These put purchases are opening orders.

I took a look at the Charts Tab and saw a few interesting things. On 9/8 this company had another huge trading day - this time it was the Oct 15 Puts trading 13,000+ times. I have included the 20 largest trades of the day (from the Charts Tab) below. Click the image to enlarge it.

From the snapshot of the Charts Tab (below - click it to enlarge) you can see the last time this happened - i.e. someone bought huge size in puts one month out (in Sep bot Oct puts) the stock went down within 9 calendar days from 17.13 (9/8 high) to 14.51 (9/17 low) or 15%.

So now we have a similar bet. Buying massive numbers of puts (~$1,000,000 bet) in the back month (second month) with the stock rallying. Add to the mix that this is a specialty retailer of technology going into Christmas and you have yourself a possible story.

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