Is this the end of the wire for RadioShack?
Shares are down more than 7% amid a mysterious rush of bearish activity. 'The sharks are starting to circle,' one trader says.
An unusual rush of bearish activity in RadioShack Corp. (RSH) options suggests some investors are betting on a fresh leg down for the beleaguered stock, traders say.
On a day with no apparent news on the retailer, options trading volume jumped to nearly six times the daily average Monday, with 81% of trading in bearish put options, according to options-data firm Trade Alert.
That notched the busiest day of trading in the Fort Worth, Texas, company's bearish options since July, when reports surfaced that the company had hired bankers to fix its balance sheet.
"The trading looks pretty bleak," said Henry Schwartz, the president at Trade Alert. "It looks like the sharks are starting to circle and put on some bets that see a strong chance of the stock collapsing," he said.
Steady trading in put options led the stock lower Monday. In recent trade, it was off 9 cents, or 3.4%, at $2.56. Heavy trading in bearish options can push a stock price down when brokers on the other side of the trade sell shares to hedge their position on the bullish side of that trade. Shares fell an additional 8 percent Tuesday, then recovered slightly in the afternoon to a 7 percent loss.
RadioShack shares have struggled over the past three years. After trading as high as $23.86 in 2010, the shares fell for more than two years, reaching a low of $1.91 in November 2012. Last year, the stock began to recover, reaching as high as $4.19 in May and September before sliding back to current levels.
On Monday, the most active options included January $2 put options, February $1.50 puts and April $1.5 puts. In the largest single trade in the January contract, an investor paid $6,912 for the right to sell 172,800 shares of RadioShack -- or about 10% of the company's daily average stock volume -- for $2 a share through Jan. 15.
The February and April $1.50 puts secure the right to sell shares at that price through Feb. 21 and April 18, respectively. A drop below $1.50 would mark a new low for the shares.
With the shares already trading so low, it looks like investors "are expecting RadioShack to soon file for bankruptcy," said Michele Skupp, senior options strategist at Miller Tabak. "With earnings coming up, there is a lot of speculation," she said. RadioShack is next expected to report earnings on Feb. 24.
RadioShack didn't immediately respond to requests for comment.
And it isn't just the options that have seen a jump in bearish activity. The number of shares on loan to short-sellers, or investors who borrow stock and sell it in the belief they will be able to buy it back later at a lower price later, has risen to a 17-month high. As of Monday, 30.3% of shares were on loan, according to Markit data.
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I know its anecdotal. When I was young I loved Radio Shack and spent a fortune in there. In a single isolated incident 20 years ago a store manager for absolutely no reason refused to accept my personal check, and made his position loudly in front of a store load of customers. Radio Shack and I parted ways. That was it for me. Amazing, but it doesn't take a lot to lose great customers. But it was a symptom of things to come.
Now if you dont want an overpriced cell phone forget it. The people working the stores think Ohms law is a religious chant and Tesla is a soft drink name.
But its partly the shoppers now too. Nobody wants to solder a circuit board kit and build their own cell phone... And if one breaks they replace it.
Radio Shack tried to somewhat change with the times but they just went in the wrong direction.
radio shack such a crappy over priced place. there are several stores near me
every time I go there I NEVER SEE Any one buying their over priced worthless
crapp.. watch my words in 2 yrs most if not all of radio shack stores will be OUT.OF BIZ.
ONLINE and china mart/walmart is killing many many other stores and businesses
in almost every field and products. as much as I freakin hate china mart/walmart
no 1 can beat their freakin prices.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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