Earnings Preview: Electronic Arts Inc., Exxon Mobil Corporation, and Seagate Technology PLC

Analyzing pre-earnings options trends on Electronic Arts Inc. (NASDAQ:EA), Exxon Mobil Corporation (NYSE:XOM), and Seagate Technology PLC (NASDAQ:STX)

Jul 30, 2015 at 1:30 PM
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Wall Street has had a bevy of earnings results to digest today -- including the latest numbers from social media giant Facebook Inc (NASDAQ:FB) -- but the week's rush of quarterly results is far from over. Tonight, video game guru Electronic Arts Inc. (NASDAQ:EA) will join a number of others on stage, while oil-and-gas issue Exxon Mobil Corporation (NYSE:XOM) and data storage specialist Seagate Technology PLC (NASDAQ:STX) will unveil their results bright and early tomorrow morning. Below, we'll take the pre-earnings temperature on EA, XOM, and STX.

  • EA has averaged a single-session post-earnings move of 7.8% over the past eight quarters -- seven of which have been to the upside. Per the stock's near-term at-the-money (ATM) straddle, the options market is pricing in a slimmer move of 6.2% this time around. Option traders have been increasing their bullish presence in the lead-up to the big event, and at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), EA's 10-day call/put volume ratio of 6.31 ranks in the 83rd annual percentile. Those currently purchasing the equity's short-term options are paying a relatively fair price, considering the stock's Schaeffer's Volatility Index (SVI) of 41% sits higher than 51% of all similar readings taken in the past year. On the charts, Electronic Arts Inc. has been a standout -- up 54% year-to-date at $72.60, and fresh off a July 21 record high of $75.10.

  • Since hitting its annual high of $104.15 exactly one year ago, XOM has shed one-fifth of its value. However, this downtrend seems to have found a bottom in the $79 region -- home to Monday's three-year low of $78.97 -- with XOM last seen near $82.96. In the options pits, speculators have been piling up on long puts in recent months, as evidenced by the equity's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.91 -- in the 84th percentile of its annual range. Meanwhile, XOM's short-term options are pricing in lofty volatility expectations. Specifically, its 30-day ATM implied volatility of 18.6% ranks above 68% of all comparable readings taken in the last 12 months. Historically speaking, Exxon Mobil Corporation has moved an average of 1.8% in the session subsequent to reporting, over the past eight quarters -- about in line with what the options market is expecting this time around, per the security's near-term ATM straddle.

  • STX -- which recently warned of a dreary fiscal fourth-quarter -- is up 2.8% this afternoon at $50.74, paring its year-to-date deficit to 23.4%. Pre-earnings options players are scooping up calls at two times the average intraday pace, with some hoping the company follows in the post-earnings footsteps of sector peer SanDisk Corporation (NASDAQ:SNDK). Today's accelerated call activity echoes the growing trend seen in STX's options arena -- the security's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.02 ranks above 70% of comparable readings taken in the past 52 weeks. Short-term options are pretty pricey right now, too, as the stock's SVI of 38% rests in the 72nd annual percentile. Looking back over the past eight quarters, Seagate Technology PLC has averaged a single-session post-earnings swing of 3.6%. This time around, speculators are expecting a bigger move of 4.9%, based on STX's near-term ATM straddle.
 

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