July 5 – July 11, 2010 Edition Barnes & Noble Stocks Slump Despite E-Book Surge

NEW YORK, NY/AUTHORLINK NEWS/July 6, 2010– Barnes & Noble, Inc. (BKS) slumped to a new 52-week low of $13.25 on June 24, despite the bookseller boasting a strong forecast for its e-book sales. The forecast was eclipsed by BKS’ disappointing fourth-quarter earnings. Specifically, BKS reported per-share losses of $0.89, exceeding analysts’ predictions for losses of $0.81, according to a report by Sarah Wasserman at Schaffer Research.

Option players rushed in to take advantage of the situation on June 29, with 4,586 contracts traded — well above BKS’ usual daily volume of fewer than 800 contracts. Unsurprisingly, puts were most popular on Tuesday, with 2,849 of these bearishly biased bets changing hands — nine times BKS’ usual daily put volume.

The July 15 put was most popular, with 970 contracts traded. Overnight, open interest fell by 324 contracts, revealing that traders were likely taking profits on their in-the-money put positions, according to Wasserman’s report.

Conversely, the July 15 call saw volume of 921 contracts traded — 83% at the bid price, revealing they were sold. Open interest increased by over 700 contracts overnight, revealing that these calls were newly added. By selling to open the July 15 call, traders are counting on BKS to remain below the $15 level for the next few weeks.

Technically speaking, BKS was struggling even before Monday’s earnings report. The stock has been in a steep downtrend since April, guided lower by its 10-week and 20-week trendlines, which recently completed a bearish cross, Schaffer Research reported. See the full story at Schaffer Research.