Dr. Reddy's Laboratories heads into its May 12 earnings release with a sharp and sudden shift in options positioning that dwarfs anything seen in the past several months.
The options market has moved to the most defensive posture of the year. The put/call ratio jumped to 1.11 on May 8 — more than three standard deviations above its 20-day mean of just 0.18. That move is not a gradual drift toward caution; it arrived abruptly over the past two sessions, with the PCR running below 0.07 for most of April before flipping to over 1.10 this week. For context, the 52-week high is 1.83, so this reading is approaching the outer range of the year. Demand for downside protection has clearly accelerated directly into the release.
The shift comes against a softening price backdrop. The ADR has lost 3.6% on the week and 1.5% on Friday alone, closing at $13.23. That follows a brief recovery in April — the stock gained roughly 2% over the past month — but the more recent pullback has erased much of that bounce. The abruptness of both the price weakness and the options re-positioning, arriving together in the final sessions before the print, makes the combination harder to dismiss as routine.
Short interest, by contrast, tells a less anxious story. Estimated short shares have fallen roughly 5% over the past month to around 13.4 million, continuing a steady decline from the mid-April peak near 15.3 million shares. Borrowing costs are low at 0.56% and easing — down 28% on the week — while availability in the lending pool has widened as short demand retreats. An ORTEX short score of 52.8 places the stock in neutral territory. The borrow market is not signalling a squeeze setup, and shorts appear to be trimming rather than pressing.
The factor backdrop adds one noteworthy data point: a dividend score ranking in the 91st percentile. Dr. Reddy's has a consistent payout history in INR, though the dividend data available for the US ADR listing is stale. On EPS surprise, the stock ranks in the 61st percentile — a modest track record of beating estimates, not a standout. Recent earnings reactions have been muted, with the stock moving less than 1% in each direction across the two most recent prints.
The May 12 report will therefore test whether the sudden demand for put protection reflects a specific concern about the quarter's fundamentals, or simply reflects proximity to the event in a stock that has been quietly re-rated lower over the past week.
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