Earnings Preview: Hewlett-Packard Company, Marvell Technology Group Ltd., and Aeropostale, Inc.

Analyzing recent option activity ahead of earnings from Hewlett-Packard Company (NYSE:HPQ), Marvell Technology Group Ltd. (NASDAQ:MRVL), and Aeropostale Inc (NYSE:ARO)

by Karee Venema

Published on May 20, 2015 at 2:18 PM

Among the stocks preparing to unveil earnings after tomorrow's close are computer concern Hewlett-Packard Company (NYSE:HPQ), semiconductor specialist Marvell Technology Group Ltd. (NASDAQ:MRVL), and retailer Aeropostale Inc (NYSE:ARO). Below, we'll take the pre-earnings temperature of HPQ, MRVL, and ARO.

  • Over the past eight quarters, HPQ has averaged a single-session post-earnings swing of 9%. This time around, the options market is pricing in a slimmer 4.9% move, based on the equity's near-term at-the-money (ATM) straddle. In the options pits, put buying has picked up speed in recent weeks, per HPQ's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.64, which ranks in the 71st annual percentile. Meanwhile, premium on the security's front-month options is currently inflated -- from a volatility perspective -- as its Schaeffer's Volatility Index (SVI) of 28% sits higher than 65% of similar readings taken in the past year. Technically speaking, the stock has been losing ground since hitting a three-year high of $41.10 on Jan. 9, down 20%. More recently, Hewlett-Packard Company has found a stern layer of resistance in the $33.50-$34 region, and was last seen lingering near $32.96.
  • Call buyers have set their sights on MRVL in the weeks leading up to its scheduled announcement. In fact, the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 41.99 is docked just 11 percentage points from a 52-week peak. Good news for those purchasing the equity's front-month options -- the stock's SVI of 34% rests lower than 68% of all comparable readings taken in the past year. In other words, premium on the short-term contracts is pricing in relatively low volatility expectations at the moment. Looking back over the past eight quarters, MRVL has averaged a single-session post-earnings move of 3% -- less than the 4.8% the stock's near-term ATM straddle is pricing in for this report. Technically speaking, the shares could use a post-earnings shot in the arm. Marvell Technology Group Ltd. has shed 15.7% since notching a three-year peak of $16.78 in February to linger near $14.14, with recent rallies quickly halted by the equity's 200-day moving average.
  • ARO option traders have been growing increasingly skeptical ahead of earnings. Over the past two weeks, ARO's 10-day put/call volume ratio at the ISE, CBOE, and PHLX has jumped to 1.33 from 0.32, and now ranks in the 98th percentile of its annual range. The stock's front-month options are priced at relatively tame levels -- its SVI of 78% is docked higher than 43% of all comparable readings taken in the last 12 months. History appears to side with the put buyers, considering ARO has averaged a single-session post-earnings move of 16% over the past eight quarters -- each one occurring to the downside. This quarter, the options market is expecting a bigger 19.5% swing, per the security's short-term ATM straddle. Aeropostale Inc's post-earnings price action just echoes the stock's longer-term technical struggles, with ARO staring at a 42% year-over-year deficit. Today, however, the shares are 3.2% higher at $2.56, thanks to an earnings-induced halo lift from sector peer American Eagle Outfitters (NYSE:AEO).

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!



NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories

Huge New Legal Marijuana Market Has Shortage Crisis
250 million Europeans have access to medical marijuana. There's already a shortage....
J M Smucker Stock Jammed by Ugly Sales Outlook
J M Smucker's fourth-quarter profits and revenue were better than Wall Street expected
NIO Rises on Record-Breaking Deliveries
Nio stock hit a record high in vehicle deliveries for May
The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.