Speculators may be liquidating positions on one sinking steel stock
The U.S. stock market is selling off today, with Wall Street spooked by escalating trade tensions between the U.S. and the European Union (EU). Among individual names making notable moves are 3D imaging specialist FARO Technologies, Inc. (NASDAQ:FARO), automation systems name HollySys Automation Technologies Ltd (NASDAQ:HOLI), and steel producer United States Steel Corporation (NYSE:X). Here's a quick look at what's moving the shares of FARO, HOLI, and X.
FARO Stock Aims for 9th Straight Win
FARO Technologies stock is up 16.7% at $55.02 -- headed toward a ninth straight win -- on news the company has tapped Michael Burger to replace outgoing CEO Dr. Simon Raab in the top spot. The shares are now trading at their highest level since mid-October, bringing their year-to-date lead to 35.31%.
The surge has sparked a flood of activity in FARO's typically bare options pits. Though light on an absolute basis, the 832 calls and 312 puts that have changed hands so far is 163 times the average daily volume and a new annual high. The April 55 call and put are most active, and it looks like new positions are being initiated at both front-month strikes.
Hollysys Sinks on Stock Offering, Downgrade
Hollysys Automation Technologies last night announced a public stock offering of 7.8 million shares. The move prompted J.P. Morgan Securities to downgrade the stock to "neutral" from "overweight," and cut its price target to $23 from $26, saying the cash-raising effort could be a sign of broader issues. In reaction, HOLI stock is down 24.3% at $17.61, pacing toward its worst day on record.
The shares closed last night with an eighth straight win and in territory not seen since before a mid-August bear gap. Today's selling has HOLI testing support at its year-to-date breakeven mark at $17.51, while below here is its Aug. 15 bear gap and Christmas Eve lows near $16.
Options volume has exploded, with 2,783 contracts traded, compared to an average daily volume of 8. With the stock short-sale restricted, it looks like speculators are buying to open the May 15 put to place their bearish bets. If this is the case, breakeven for the put buyers at May options expiration is $14.57 (strike less volume-weighted average price of $0.43).
Credit Suisse Sets Street-Low U.S. Steel Price Target
Credit Suisse downgraded U.S. Steel stock to "underperform" from "neutral," and slashed its price target to a Street-low $13 from $21, saying rising maintenance costs and outage spending could create headwinds for X. The equity is down 9% at $17.96 in today's trading, set for its lowest close since Dec. 24.
Some options bears may be liquidating their positions amid today's plunge. The April 18 put is most active today, with 13,000 contracts on the tape. The bulk of these puts have crossed at the bid price, and considering this strike was already home to peak X open interest of 23,624 contracts, it's possible traders are selling to close their positions.