Puts for Luminar Technologies (LAZR) Tops Unusual Options Screener

In some ways, the volatility currently impacting Luminar Technologies (LAZR) was out of its control. With the broader market sentiment transitioning from a dovish environment to aggressively hawkish, aspirational and growth-centric enterprises like Luminar suffered tremendously. After all, LAZR stock represents an investment in what may be, not what is.

Nevertheless, a significant reason why Luminar – which specializes in lidar innovations to usher in a new era of vehicle safety and autonomy, per its website – succumbed to market pressure could be brewing questions about the autonomous driving industry’s long-term viability. While it’s always possible that some investors are ignoring key developments undergirding LAZR stock, shares fell more than 68% on a year-to-date basis.

In other words, it’s hard to imagine so many people getting this wrong. In addition, fading interest among Wall Street analysts along with sharp demand for put options on LAZR stock present an uncomfortable narrative for the once-red hot lidar investment.

At its peak in February of last year, the average price of LAZR stock was moving toward the $40 threshold. Today, shares trade for under $6 a pop, reflecting roughly an 85% decline from the summit.

Fundamentally, experts in the autonomous systems sector raised concerns about the effectiveness of lidar. For example, Chuck Gershman, CEO and cofounder of Owl Autonomous Imaging, stated that while lidar provides clear benefits to autonomous applications, the technology alone is not enough to see artificial intelligence protocols command the future of mobility.

Per Gershman, lidar’s capability comes under fire when faced with less-than-ideal environments. As well, the tech features high costs which can derail proposed applications. “Lidar does work at night very well, but it doesn't necessarily give you all the information as detailed as a camera system.”

As a result, prospective investors may want to tread carefully.

LAZR Stock Takes Pole Position in Terms of Unusual Options Activity

Following the close of the Dec. 22 session, LAZR stock represented the oddest of the bunch in terms of Barchart.com’s screener for unusual options activity. Specifically, traders targeted the $6 puts with an expiration date of Dec. 30, 2022 – eight days since the placement of the order before the contracts expire worthless.

Moreover, volume reached 40,217 contracts against an open interest reading of 216. Implied volume or the estimated volatility of the option strike over the period of the option hit 74.10%. The bid-ask spread as represented by the midpoint price (45 cents) came out to 17.77%.

Further, other sources corroborate the dramatically increased activity toward put options on LAZR stock. Per MarketBeat.com, on the Thursday session, investors bought 142,036 put options on Luminar, representing an increase of 111% compared to the average daily volume of 67,405 put options.

In the open market, LAZR stock closed at $5.67. Since the start of this year, shares declined by 68.46%. Also, the magnitude of bearish momentum has been incredibly robust recently. In the trailing month, LAZR dropped 26.46% of equity value. And in the trailing five days, the stock slipped 17.47%.

To be fair, certain dynamics play out favorably for LAZR stock. At time of writing, Luminar’s put/call open interest ratio is 0.54. Typically, figures below the 0.70 threshold indicate that more traders are buying calls than puts. As well, analyst sentiment pings optimistically for the lidar specialist.

Still, investors need to be on their toes. Three months ago, Wall Street experts pegged LAZR stock as a “moderate buy.” This broke down individually as five strong buys and three holds. In the current month, the overall assessment remains the same. However, Luminar now features six strong buys and four holds.

Stated differently, the percentage of total analysts bullish on LAZR stock declined slightly from 62.5% three months ago to 60% in the current month.

Other Autonomy Failures Cloud the Broader Segment

While it wouldn’t be fair to cast aspersions on Luminar based on the failures of its rivals, the market remains governed by human emotions. Therefore, it’s not unreasonable to assume that technological concerns in one sector player can negatively impact the whole industry.

For instance, autonomous trucking driving systems provider TuSimple (TSP) recently announced layoffs that could severely impact the development of its algorithms necessary for self-driving protocols to work. By logical deduction, if autonomous driving solutions were so easy and effective to implement, TuSimple probably wouldn’t be cutting into the core of its enterprise.

More critically, an autonomous-driving truck integrated with TuSimple’s technology suffered a crash in April of this year, sparking a federal safety investigation. Although management blames human error – specifically that the engineer/driver team onboard failed to input correct protocols – analysts pointed the finger at a flaw within the autonomous system itself.

Again, it’s not directly related to LAZR stock. Unfortunately, autonomous driving systems are facing both financial and fundamental headwinds. Especially with investors worried about a potential global recession, they may just dump risk-on names for safer fare.

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