Earnings Preview: Microsoft Corporation, Angie's List Inc, and ARM Holdings plc (ADR)

Analyzing pre-earnings option trends on Microsoft Corporation (MSFT), Angie's List Inc (ANGI), and ARM Holdings plc (ADR) (ARMH)

Jul 21, 2015 at 2:44 PM
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U.S. stocks are taking it on the chin today, after the latest batch of big-cap earnings left much to be desired. Along with Apple Inc. (NASDAQ:AAPL), some of the companies about to step up to the earnings plate are blue-chip tech titan Microsoft Corporation (NASDAQ:MSFT), online review issue Angie's List Inc (NASDAQ:ANGI), and microprocessor designer ARM Holdings Inc plc (ADR) (NASDAQ:ARMH). Below, we'll take the pre-earnings temperature of MSFT, ANGI, and ARMH. 

  • MSFT is swimming in the red with its sector peers, down 0.7% at $46.60 to test its year-to-date breakeven mark. Over the past eight quarters, MSFT has averaged a one-day post-earnings move of 5.2%. The stock's near-term at-the-money (ATM) straddle suggests the options market is pricing in a similar move of 5.3%. Last quarter, Microsoft Corporation enjoyed a single-session gain of 10.5%, and it seems option buyers are hoping for another earnings win tonight. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open MSFT calls over puts at a near-annual-high clip; the stock's 10-day call/put volume ratio of 2.85 stands in the 98th percentile of its annual range. Also, MSFT's near-term options can be had at a relative discount, as the equity's Schaeffer's Volatility Index (SVI) of 26% sits higher than just one-third of all other readings from the past year. 
  • ANGI will unveil its second-quarter figures before the open tomorrow. The shares are overcoming broad-market headwinds, up 1.2% at $6.10, but short-term options traders haven't been more put-heavy during the past year; the equity's Schaeffer's put/call open interest ratio (SOIR) sits at an annual peak of 1.38. Echoing that, the stock's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.60 sits 2 percentage points from a 12-month acme. Historically, Angie's List Inc has averaged a one-day post-earnings move of 15.9%, going back eight quarters. This time, the options crowd is gambling on more drama, as the stock's near-term ATM straddle is pricing in a 25% move. However, ANGI's Schaeffer's Volatility Scorecard (SVS) sits at a relatively low 27, suggesting the stock has tended to make underwhelming moves on the charts during the past year, relative to what the options market has priced in. 
  • Finally, ARMH will report second-quarter earnings tomorrow morning. The shares are bucking the trend lower today, up 0.6% at $47.98, bringing their year-to-date gain to 3.6%. ARMH has averaged a single-session swing of 5.5% in the session after its last eight earnings reports, but option traders are expecting a move of 8.8% this time, per the security's short-term ATM straddle. As with ANGI, ARM Holdings plc speculators are bearishly biased; the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 5.88 registers in the 92nd percentile of its annual range, and its SOIR of 1.34 is higher than 95% of all other readings from the past year. Meanwhile, the equity's 30-day ATM implied volatility sits at 37.7% -- in the 96th percentile of its annual range.

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