Earnings Preview: Kite Pharma Inc, Cree, Inc., and JA Solar Holdings Co., Ltd.

Analyzing pre-earnings option trends on Kite Pharma Inc (NASDAQ:KITE), Cree, Inc. (NASDAQ:CREE), and JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO)

Aug 10, 2015 at 3:00 PM
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Although earnings season is winding down, there are still a number of notable names slated to unveil their results this week. Included in the bunch are biopharmaceutical firm Kite Pharma Inc (NASDAQ:KITE), semiconductor concern Cree, Inc. (NASDAQ:CREE), and alternative energy issue JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO). Below, we'll take the pre-earnings temperature of KITE, CREE, and JASO.

  • KITE will unveil its results after tonight's close, and -- unlike fellow drugmakers Aquinox Pharmaceuticals Inc (NASDAQ:AQXP) and Inovio Pharmaceuticals Inc (NASDAQ:INO) -- the stock has barely budged, up less than 0.1% at $69.31. Although the security has moved just 2%, on average, in the session subsequent to reporting over the past seven quarters, KITE's near-term at-the-money (ATM) straddle is pricing in a big 10.2% swing. Option traders, it seems, are expecting this action to resolve to the upside, and at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), they have bought to open 3.90 calls for each put in the past two weeks. Technically speaking, the stock has put in a solid performance on the charts since hitting its year-to-date low of $45.36 in mid-May (and subsequently taking a sharp bounce off its 200-day moving average), up 53%. Additionally, after an initial trek south earlier, Kite Pharma Inc found a foothold atop its 32-day moving average today -- a trendline that's ushered KITE higher since early June.

  • CREE has historically made some big moves in the session subsequent to reporting, averaging a swing of 12.3% over the past eight quarters. This time around, the options market is expecting the stock to move 9.9% after it reports tomorrow night, per CREE's near-term ATM straddle. Speculators have been initiating long calls at a rapid-fire rate in recent months, as evidenced by the equity's 50-day ISE/CBOE/PHLX call/put volume ratio of 3.09, which sits just 7 percentage points from a 52-week peak. Meanwhile, those currently purchasing CREE's short-term options are paying a pretty penny, considering the equity's Schaeffer's Volatility Index (SVI) of 66% rests higher than 78% of all similar readings taken in the past year. On the charts, Cree, Inc. has had a dismal year, shedding nearly half its value over the past 12 months to churn near $25.78.

  • JASO option traders have been initiating long puts over calls at an annual-high clip ahead of tomorrow morning's quarterly earnings report. At the ISE, CBOE, and PHLX, specifically, the security's 50-day put/call volume ratio of 0.55 ranks higher than all other comparable readings taken in the past year. Historically speaking, the security has averaged a single-session post-earnings move of 13.7% over the past eight quarters, slightly more than the 10.7% the equity's near-term ATM straddle is forecasting this time around. Based on JASO's 30-day ATM implied volatility of 69.6% -- in the 97th annual percentile -- the equity's short-term options are currently pricing in extremely high volatility expectations. Today, shares of JA Solar Holdings Co., Ltd. are up 2.1% at $7.72, paring their year-to-date deficit to 5.7%.

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