Unusual Options Activity: Vornado Realty Trust (VNO)

Shares of office real estate investment trust Vornado Realty Trust (VNO) are down over 50 percent from their peak price in 2015. While recovering from last year’s work-from-home trends, one trader sees a decline in shares in the coming months.

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  • That’s based on the September $40 puts. With 127 days until expiration, over 10,535 contracts traded against a prior open interest of 175, for a 60-fold rise in volume.

    With shares around $46, the option would move in-the-money on a 15 percent decline. The buyer of the puts paid about $1.78.

    Vornado has a focus on office space in New York City, the Bay Area, and Chicago. All three markets have been hit hard by the pandemic and the rise of work-from-home trends. Vornado has seen revenue drop 12 percent over the past year, even as earnings have risen.

    The company has also cut its dividend slightly already, from $2.25 annually to $2.12. With the company reporting a loss last year, its dividend payout ratio is far in excess of earnings.

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  • Action to take: This looks like an inexpensive hedge trade for the overall market. The company is poorly poised for today’s real estate trends, and a further cut in the dividend could lead to a quick drop in shares from here.

    Investors may like this trade as a hedge against the overall market, or to bet that certain office markets will take a much longer time to get back to pre-pandemic activity.


    Disclosure: The author of this article has no positions in the stock mentioned here, and does not intend to make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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