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Ahead of Earnings, Traders Eye Cintas' Longer-Term Calls

CTAS calls continue to get preferential treatment from options players

by 12/20/2011 12:00 PM
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Cintas Corporation (CTAS - 31.44) has seen an increase in call volume today, as more than 2,100 of these options have changed hands so far, reflecting 12 times the equity's expected intraday volume. Close to 1,100 calls were traded at the out-of-the-money May 2012 35 strike -- nearly all of them at the ask price, suggesting they were bought. However, this call currently holds open interest of 3,182 contracts, making it difficult to discern whether new positions are being initiated in this session, just hours before the company's fiscal second-quarter earnings release.

Still, this affinity for calls is nothing new for the uniform provider. The Schaeffer's put/call open interest ratio (SOIR) for CTAS stands at 0.24, meaning that calls more than quadruple puts among options expiring within three months. This ratio registers in the 37th percentile of its annual range, indicating that short-term options players have been more bullishly oriented toward the stock just 37% of the time during the past 12 months.

What's more, CTAS' 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 11.30, confirming that calls bought to open have outnumbered puts by more than 11 to one during the past couple of weeks. This ratio ranks in the 78th annual percentile, signaling that traders have been purchasing bullish options over bearish at a faster-than-usual clip.

However, short interest on CTAS surged by almost 20% during the past two reporting periods, which could imply that some of the recent call volume may be the result of hedging activity by short sellers. Either way, these bearish bets make up 4.76% of the equity's float. At the stock's average daily trading volume, it would take almost four days to cover these shorted shares.

On the technical front, CTAS has gained around 12.3% year-to-date, and has outperformed the broader S&P 500 Index (SPX) by over 5% during the past 40 sessions. On the charts, the stock is testing resistance at its 10-month moving average, which had previously served as support.

At last check, CTAS is up about 2.5% to wink at the $31.44 level.


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