Earnings Preview: Halliburton Company, Hasbro, Inc., and International Business Machines Corp.

Analyzing pre-earnings options trends on Halliburton Company (NYSE:HAL), Hasbro, Inc. (NASDAQ:HAS), and International Business Machines Corp. (NYSE:IBM)

Jul 17, 2015 at 1:25 PM
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It was a big week on the earnings front -- and Google Inc (NASDAQ:GOOGL) is just one name reaping the rewards of strong results -- with next week's action really heating up. Among the many names getting ready to report second-quarter results are oil-and-gas issue Halliburton Company (NYSE:HAL), toy maker Hasbro, Inc. (NASDAQ:HAS), and tech titan International Business Machines Corp. (NYSE:IBM). Below, we'll take the pre-earnings temparature of HAL, HAS, and IBM.

  • HAL is slated to step onto the earnings stage first thing Monday morning. Over the past eight quarters, the stock has averaged a single-session post-earnings move of 1.8%, but this time around, the options market is betting on a bigger 4.4% swing -- based on HAL's near-term at-the-money (ATM) straddle. Short-term traders are more put-skewed than usual, per the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.07, which rests higher than 87% of all similar readings taken in the past year. Those purchasing options are currently willing to pay a bit more, too. Halliburton Company's 30-day ATM implied volatility (IV) of 31.2% ranks in the 62nd annual percentile. In other words, premium on the stock's near-term options is pricing in elevated volatility levels. On the charts, HAL has surrendered 20% since being rejected by the round-number $50 mark in early May. Today, however, the equity is up 0.3% at $40.30, thanks to a price-target hike to $66 from $54 at Deutsche Bank.

  • HAS will also unveil its results Monday morning, and option traders are hoping the stock gets a better reaction than sector peer Mattel, Inc. (NASDAQ:MAT). Specifically, the security's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.11 ranks in the 76th percentile of its annual range, meaning calls have been bought to open over puts at an accelerated clip in recent months. Premium on the equity's near-term options is relatively inflated at the moment -- HAS' 30-day ATM IV of 25.3% is just 11 percentage points from a 52-week peak. Looking back over the past eight quarters, Hasbro, Inc. has, on average, swung 5.3% in the session subsequent to reporting, but this time, the stock's near-term ATM straddle is pricing in a loftier 6.3% move. Technically speaking, the shares have added an impressive 41% year-to-date. Plus, they topped out at a record peak of $79 earlier, and were last seen lingering near $77.60.

  • IBM will take its turn in the earnings confessional after Monday's close, and ahead of the event, the stock is up 0.6% at $171.93 -- widening its year-to-date advance to 7.2%. More recently, the security toppled its 60-day moving average earlier this week -- a trendline that had served as resistance since early June, but could now be switching to a supportive role. Next week, the options market is expecting IBM to swing 3.6% in the wake of reporting -- according to the equity's short-term ATM straddle -- slightly more than the 3.3% single-session post-earnings move IBM has averaged during the past eight quarters. Option traders, meanwhile, have been loading up on long calls in recent months. At the ISE, CBOE, and PHLX, International Business Machines Corp.'s 50-day call/put volume ratio of 1.56 sits in the 88th annual percentile. The equity's short-term options can currently be had for relatively middling prices, as its Schaeffer's Volatility Index (SVI) of 19% ranks higher than 56% of comparable readings taken in the past year.

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