Earnings on Deck: Mattel, Inc., General Electric Company, and Honeywell International Inc.

Analyzing pre-earnings option trends on Mattel, Inc. (NASDAQ:MAT), General Electric Company (NYSE:GE), and Honeywell International Inc. (NYSE:HON)

by Karee Venema

Published on Jul 16, 2015 at 11:38 AM
Updated on Jun 24, 2020 at 10:16 AM

Second-quarter earnings season is heating up -- with both Intel Corporation (NASDAQ:INTC) and eBay Inc (NASDAQ:EBAY) making moves in the wake of their quarterly results. Looking ahead, toy titan Mattel, Inc. (NASDAQ:MAT), blue chip General Electric Company (NYSE:GE), and aerospace issue Honeywell International Inc. (NYSE:HON) are all on deck to report earnings. Below, we'll take the pre-earnings temperature of MAT, GE, and HON.

  • MAT will join Advanced Micro Devices, Inc. (NASDAQ:AMD) on the earnings stage after tonight's close, and following its last eight quarterly showings, the stock has averaged a single-session swing of 4.5% -- the majority of which have occurred to the downside. This time around, the options market is pricing in a bigger 5.4% move, based on MAT's near-term at-the-money (ATM) straddle. Longer term, the stock has been a technical laggard, off 17.8% year-to-date to trade at $25.42. Option traders have kept the faith, though, and at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Mattel, Inc.'s 50-day call/put volume ratio of 1.59 ranks in the 96th annual percentile. Meanwhile, those purchasing the equity's near-term options are paying relatively inflated prices, considering MAT's 30-day ATM implied volatility (IV) of 27.9% rests higher than 67% of all similar readings taken in the past year.

  • GE -- which has been making a string of headlines this month -- will tell all in the earnings confessional bright and early tomorrow morning. Ahead of the event, the stock is up 0.4% at $26.88 -- bringing its year-to-date gain to 6.4%. For tomorrow's trading, the options market is expecting the stock to post a single-day move of 2.1% -- roughly in line with what GE has averaged over the past eight quarters in the session subsequent to reporting -- per its near-term ATM straddle. In the options pits, short-term speculators are more call-skewed than usual, as evidenced by General Electric Company's Schaeffer's put/call open interest ratio (SOIR) of 0.73, which ranks in the 36th annual percentile. Premium on the equity's near-term options is pricing in slightly higher volatility than normal -- GE's 30-day ATM IV of 15.9% sits above 56% of all similar readings taken over the last 12 months.

  • HON will also unveil earnings tomorrow morning, and, according to its near-term ATM straddle, is expected to move 2.6% in the wake of reporting. This is slightly more than the 2.3% single-session post-earnings move HON has averaged over the past eight quarters. Since hitting an annual low of $82.89 in mid-October, the security has been charting a path steadily higher -- up 25.3% at $103.84, and closing in on its May 18 all-time high of $107.10. Put players, meanwhile, haven't been buying the uptrend. In fact, at the ISE, CBOE, and PHLX, Honeywell International Inc.'s 10-day put/call volume ratio of 2.69 ranks in the 98th percentile of its annual range. In other words, puts have been bought to open over calls with more rapidity just 2% of the time within the past year. A capitulation among these skeptics could result in tailwinds. Meanwhile, premium on the stock's short-term options is relatively tame at the moment, per its 30-day ATM IV of 17.2%, which rests above 59% of all comparable readings taken in the past year.

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