Apple Event Helps Energous Short Sellers Win the Day – Schaeffers Research (blog)

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Wireless technology stock Energous Corp (NASDAQ:WATT) has been an intriguing speculative play on Wall Street in recent years. Interest in the shares increased dramatically at the end of 2016, following comments by the company’s CEO that many interpreted to mean it was working with Apple. As it turns out, that’s not the case, since Apple yesterday announced it’s using Qi technology in the iPhone X. WATT stock is selling off as a result, last seen 4.7% lower at $10.40. Though the security is short-sale restricted today, this price action has to be music to the ears of short sellers. 

Looking back, short interest on Energous really began to ramp up in early 2016, and continued to rise with the stock price in the ensuing months. Clearly, these bears had conviction in their bets. The equity touched a record high of $20.55 back in January of this year, just when short interest was also reaching an all-time peak. In fact, short sellers continued to pile on through April, when a record 5.8 million shares were sold short. 

Though short interest is slightly lower now, it still represents almost one-third of WATT’s float. And just for good measure, these bears increased their bets by 6.5% in the reporting period leading up to Apple’s product unveil. 

There was also so notable options trading activity before the Apple event. Per usual, call buying was very popular on Energous, more than doubling put buying over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Buy-to-open activity was spotted at the September 15, 17.50, 20, and 22.50 calls.

The 15 and 22.50 strikes saw the largest increases in open interest during this time frame, and those opening long positions here were hoping for an upside move from the shares before the contracts expire this Friday. Of course, some of this activity could have been at the hands of short sellers hedging their positions with options, especially at the far out-of-the-money 22.50 strike. 

Analysts might have to reconsider their positions, too. Two out of the three covering brokerage firms have issued “strong buy” ratings, and the average 12-month price target stands up at $18.60 for WATT stock.