Earnings Preview: Netflix, Inc., Citigroup Inc, and Advanced Micro Devices, Inc.

Analyzing pre-earnings option trends on Netflix, Inc. (NFLX), Citigroup Inc (C), and Advanced Micro Devices, Inc. (AMD)

Jul 15, 2015 at 11:24 AM
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Among the companies about to step up to the earnings plate are streaming content titan Netflix, Inc. (NASDAQ:NFLX), financial firm Citigroup Inc (NYSE:C), and semiconductor issue Advanced Micro Devices, Inc. (NASDAQ:AMD). Below, we'll take the pre-earnings temperature of NFLX, C, and AMD.

  • NFLX just underwent its 7-for-1 stock split, and is now trading south of the century mark, at $99.59. The company is set to report second-quarter earnings after the closing bell, and short-term option traders are more call-heavy than usual. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.09 stands higher than just 36% of all other readings from the past year. In the wake of its last eight turns in the earnings confessional, Netflix, Inc. has averaged a single-session post-earnings swing of 12.1%. According to the stock's near-term at-the-money (ATM) straddle, traders are pricing in an 8.7% move in either direction. Now is an opportune time to gamble with NFLX's short-term contracts, as the stock's Schaeffer's Volatility Scorecard (SVS) of 94 suggests the stock has tended to make outsized moves over the past year, relative to what the options market has priced in. Elsewhere, Topeka Capital revised its price target on NFLX to $114.
  • C will follow its financial-sector peers into the earnings spotlight ahead of the open tomorrow. Looking back to the past eight quarters, the stock has averaged a one-day move of 2.9% in the session after earnings. Short-term option traders are expecting more of the same, as Citigroup Inc's near-term ATM straddle is pricing in a 2.4% swing. Ahead of this go-round, speculators have been scooping up bullish bets at a much faster-than-usual clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 4.00 registers in the 98th percentile of its annual range. C's short-term options can be had at a relative discount, too, as the equity's Schaeffer's Volatility Index (SVI) of 19% sits higher than just 27% of all other readings from the past year. At last check, financials were among the top performers today, and C is no exception, up 0.8% at $56.34. 
  • Finally, AMD will unveil its second-quarter figures after the close tomorrow. Over the past eight quarters, the stock has averaged a single-session post-earnings move of 11.2%. Right now, the equity's short-term ATM straddle is pricing in a 10% move in either direction. Since gapping lower on a sales warning earlier this month, the shares of Advanced Micro Devices, Inc. have danced around the $2 level -- hitting a six-year low of $1.93 on July 9 -- and were last seen fractionally higher at $2.06, after Mizuho launched coverage with a "neutral" rating and $2.25 price target. Option buyers are betting on even lower lows, it seems, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 3.17 ranks in the 95th percentile of its annual range. In that same vein, short interest accounts for 15.1% of AMD's total float, and would take more than four sessions to unwind, at the security's average pace of trading. The equity's 30-day ATM implied volatility has jumped 9.7% to 77% today -- higher than 94% of all other readings from the past year, reflecting elevated volatility expectations.

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