Earnings Preview: Zynga, Cyberark Software, NVIDIA

Analyzing recent option activity ahead of earnings from Zynga Inc (NASDAQ:ZYNGA), Cyberark Software Ltd (NASDAQ:CYBR), and NVIDIA Corporation (NASDAQ:NVDA)

May 6, 2015 at 2:58 PM
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Among the stocks gearing up to report earnings are social gaming firm Zynga Inc (NASDAQ:ZNGA), cybersecurity specialist Cyberark Software Ltd (NASDAQ:CYBR), and chipmaker NVIDIA Corporation (NASDAQ:NVDA). Below, we'll take the pre-earnings temperature of ZNGA, CYBR, NVDA. 

  • Since gapping lower -- and breaching its 50-day moving average -- on the heels of a management shake-up in early AprilZNGA has made steady progress on the charts, and is on pace to end atop that moving average for the first time in almost a month. Still, put activity in the options pits is ramping up, as Zynga Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.17 stands in the 69th percentile of its annual range. What's more, ZNGA's Schaeffer's put/call open interest ratio (SOIR) of 0.61 is higher than 84% of all similar readings from the past year, showing that near-term traders have rarely been this put-heavy. Elsewhere, the stock has moved an average of 4.7% in the session immediately following its last four earnings reports. However, after ZNGA takes its turn in the earnings limelight later tonight, the options market expects the stock to move 11.2% by Friday's close, per its near-term at-the-money (ATM) straddle. Short-term options players are paying middling prices, relatively, as ZNGA's Schaeffer's Volatility Index (SVI) of 89% reads in the 54th percentile of its annual range. 
  • On the other hand,  CYBR has been an incredible outperformer, with the shares up 57.3% year-to-date to flirt with $62.38. Sentiment in the options pits has been bullish ahead of tomorrow night's earnings release -- over the past 10 days at the ISE, CBOE, and PHLX, 2.62 Cyberark Software Ltd calls have been bought to open for every put. On the earnings front, CYBR has spent its only two post-earnings sessions in the black, with the shares experiencing an average gain of 21.2%. According to the stock's near-term ATM straddle, the options market is pricing in a move of 14.8% this time around. Near-term traders are paying up to bet on the equity's post-earnings trajectory, as CYBR's 30-day ATM implied volatility of 92.7% is higher than 91% of all similar readings from the past year. 
  • NVDA announced yesterday that it is shutting down its Icera modem divisionand could put the unit up for sale. Year-to-date, the shares are up over 9% and are testing support in the $22 region, home to their post-earnings bull gap in February. Despite this technical tenacity, options traders have favored puts over calls, as NVIDIA Corporation's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.43 is higher than 94% of all equivalent readings from the last 12 months. Meanwhile, NVDA has experienced an average post-earnings swing of 5.1% in the session immediately following its last four earnings reports. After NVDA steps into the earnings confessional tomorrow night, the options market expects the security to move 5.8% by Friday's close, per its near-term ATM straddle. Short-term options players are paying inflated prices, relatively, as NVDA's SVI of 48% ranks in the 70th percentile of its annual range.

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