HAS Unusual Option Activity Report
Hasbro’s share price fell 9.3% following the company’s earnings report on Monday before the market open. The price has been searching for support the past couple days, but Wednesday’s option activity is pointing to additional downside.
HAS Seasonality
In a statement on Tuesday, Hasbro CEO is optimistic about the company’s prospects going into the Christmas holiday season. During an appearance on Yahoo finance’s First Trade, the CEO said:
"In October, we have seen high-teens [percentage] point-of-sale growth for both toys and games. We believe we'll have a good holiday season. We also believe we can grow versus last year's pro-forma numbers, with the combination of eOne Entertainment and Hasbro."
Hasbro (HAS) Chairman and CEO Brian Goldner
That type of sentiment would typically jive with the historical movement of the company this time of year. During the month of November, Hasbro has a history of performing well. In fact, it historically outperforms the S&P 500 and its sector.
If that’s the case, why is the options market buying puts?
A recent Gallup poll may support the bears’ outlook. Looking at Americans Christmas spending plans, it appears that 28% of respondents plan to spend less money this year compared to 2019. That is the largest percentage of consumers that plan to reduce purchases since 2012 and the sharpest increase since 2008.
The average holiday spending plans are down to $805 compared to $942 in 2019. That’s the lowest amount since 2016.
The macro perspective provided by Gallup certainly give some credence to being uncharacteristically bearish this time of year. Also, looking at the response to the earnings report, it appears that there wasn’t much for investors to celebrate.
HAS Option Activity
Wednesday’s option activity on Hasbro was significantly more weighted to the put side with a put-to-call ratio of 2.865. The put option volume was over 6.7 times the average and had 59% of the activity fill at the ask price. Virtually all the volume was on one option contract. Here are the details of the activity:
- 15,000 20 NOV 20 $75 put mostly BOT @ $0.75 to $1.20 against open interest of 137
The combination of strike and expiration places a bearish near-term outlook for the price. That’s a $9 price move to the strike price with only 23 days remaining.
HAS Technicals
Looking at the charts of Hasbro finds the stock price breaking recent support near $85 and establishing a lower low. The high of the gap day on Monday is $87.90 and is a near-term projected area of resistance for the price.
The $75 strike price aligns with the support level established in August and September. That level is also near the 50% retracement of the downtrend from February and March.
With the price testing the October 26 low of $82.25, a close below this level will open it up for the price to fall to the the $75 support level.
Conclusion
Taking a bearish trade on a stock like Hasbro this time of year is what is called a contrarian trade. However, the company did miss analysts EPS expectations for last quarter’s earnings by a hefty margin. That places a lot of weight on the consumer to come through this quarter. If the Gallup results are any indication, Santa may not be coming this year for retail.
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