Options Turn Bearish on PetMed Express

The $20 mark served as resistance for PetMed Express in 2006, and at least one trader expects that level to keep the stock in check again now.

optionMONSTER's Depth Charge tracking system detected unusual activity in the November 17.50 puts yesterday. Volume in the strike rose to 3,282 contracts, more than 13 times existing open interest. Purchases for $0.65 and $0.70 accounted for the bulk of the trades.

PETS fell 0.31 percent to $19.20 and is up 26 percent in the last three months. However, the pace of gains has slowed as the animal-pharmacy stock approaches its all-time high of $20.20 from March 2006. It also pulled back after nearing $20 last week.

The waning momentum at a key resistance level may cause some traders to expect a deeper correction. PETS needs to fall about 13 percent for yesterday's put buyers to make a profit.

The last time PETS issued results on July 20, sales and earnings both beat analysts' forecasts.

Overall options volume in the name was 14 times greater than average, with puts outnumbering calls by 11 to 1.

(Chart courtesy of tradeMONSTER)

By: David Russell ([e-mail])

Comments

[value81:]

What do you make of PETS spiking up to $20.28 as an intraday high today?

I'll be listening to their quarterly conference call Monday morning. I doubt that CEO Mendez and the board bought much for their company stock buyback since they normally like to buy shares at about $13 per share. Probably will save the cash for now for a dividend war chest.

If they have another earnings beat of close to 4 cents per share, then the stock should continue to rise by one to three dollars per share over the next seven weeks or so.

Why doesn't Amazon take them over? Seems like there could be economies of scale as well as cross selling here.

Oct 17 12:26 AM