Earnings Preview: Fitbit Inc, Barrick Gold Corporation (USA), and Herbalife Ltd.

Analyzing pre-earnings option trends on Fitbit Inc (FIT), Barrick Gold Corporation (USA) (ABX), and Herbalife Ltd. (NYSE:HLF)

Aug 4, 2015 at 2:11 PM
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U.S. stocks are lower this afternoon, as traders weigh lackluster data on factory orders and one major blue chip's slide. Among the companies about to step up to the earnings plate are health technology firm Fitbit Inc (NYSE:FIT), commodities concern Barrick Gold Corporation (USA) (NYSE:ABX), and nutritional supplements provider Herbalife Ltd. (NYSE:HLF). Below, we'll take the pre-earnings temperature of FIT, ABX, and HLF, which will all report after the close on Wednesday.

  • Ahead of FIT's first time in the earnings confessional, the options market is pricing in a 12.5% swing in either direction, per the stock's near-term at-the-money (ATM) straddle. Option buyers have picked up Fitbit Inc calls over puts at a margin of nearly 3-to-1 during the past two weeks -- reflecting a bullish bias -- per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Meanwhile, analysts are also optimistic, as FIT sports seven "buy" or better ratings, compared to five lukewarm "holds" and not a single "sell." On the charts, FIT has more than doubled from its mid-June IPO price of $20, and was last seen at $48.97.
  • Following its past eight turns in the earnings spotlight, ABX has averaged a single-session post-earnings move of 3.6%. Traders are harboring expectations for a much bigger move this go-round, as the stock's near-term ATM straddle is pricing in a 7.9% swing. On the charts, Barrick Gold Corporation has been abysmal, underperforming the S&P 500 Index (SPX) by 47 percentage points during the past three months, and touching a 25-year low of $6.62 just yesterday. The stock is 1.4% higher at $6.79 today, thanks to a commodities rebound, and option players are gambling on more upside. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 6.15 stands higher than 84% of all other readings from the past year. What's more, bulls are paying a pretty penny to bet with ABX's short-term options; the security's Schaeffer's Volatility Index (SVI) of 69% registers in the 81st percentile of its annual range.
  • Finally, HLF's short-term speculators are also paying up to gamble on the equity, as the stock's SVI of 108% stands higher than 82% of all other readings from the past year. Speculators are picking up Herbalife Ltd. calls over puts at a faster-than-usual rate, as the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.78 sits in the 93rd percentile of its annual range. However, some of those calls may have been purchased by short sellers looking for a hedge; short interest represents more than 16 sessions of pent-up buying demand, at HLF's average daily trading volume. Historically, HLF has averaged a one-day post-earnings move of 8.6% over the past eight quarters. This time, though, the stock's near-term ATM straddle is pricing in a swing of 14.7%.  Technically, HLF is up 33% year-to-date, sitting at $49.99, but has struggled to make a decisive break north of $55.

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