Earnings Preview: Home Depot Inc, Wal-Mart Stores, Inc., and Canadian Solar Inc.

Analyzing pre-earnings option trends on Home Depot Inc (NYSE:HD), Wal-Mart Stores, Inc. (NYSE:WMT), and Canadian Solar Inc. (NASDAQ:CSIQ)

Aug 17, 2015 at 11:24 AM
facebook twitter linkedin


Second-quarter earnings season is quickly drawing to a close; however, there's still plenty of action on this week's calendar to hold Wall Street's attention. Specifically, blue chips Home Depot Inc (NYSE:HD) and Wal-Mart Stores, Inc. (NYSE:WMT), as well as alternative energy issue Canadian Solar Inc. (NASDAQ:CSIQ), are slated to step up to the plate bright and early tomorrow morning. Below, we'll take the pre-earnings temperature of HD, WMT, and CSIQ.

  • HD is up 0.5% at $120.34 -- and fresh off a record peak of $120.47 -- on word that George Soros upped his stake in the company by 17.2% in the second quarter. Longer term, the shares have tacked on 14.6% year-to-date. Option traders have been upping the bullish ante ahead of earnings, per HD's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.27, which ranks in the 84th annual percentile. Those purchasing the stock's short-term options are contending with elevated volatility expectations at the moment, considering HD's 30-day at-the-money (ATM) implied volatility (IV) of 21.3% sits higher than 87% of all comparable readings taken in the past year. Meanwhile, looking back over the past eight quarters, Home Depot Inc has averaged a single-session post-earnings move of 2.7% -- slightly less than the 3.3% the security's near-term ATM straddle is pricing in this time around.

  • Call buyers have also been busy in the lead-up to WMT's big event. In fact, at the ISE, CBOE, and PHLX, the equity's 50-day call/put volume ratio of 3.43 ranks just 5 percentage points from a 52-week peak. Short-term traders are willing to pay a pretty penny for their bullish bets, as well, with the equity's 30-day ATM IV topping out at an annual high of 22.1% earlier. Historically speaking, WMT has averaged a 2.5% single-session post-earnings swing over the past eight quarters. This time, the stock's near-term ATM straddle is forecasting a bigger move of 3.8%. Technically speaking, Wal-Mart Stores, Inc. has been in a steady downtrend since topping out at a record high of $90.97 in mid-January, off 21%. More recently, the shares have encountered an overhead ceiling in the form of their 60-day moving average, and were last seen lingering near $72.16.

  • Over the last eight quarters, CSIQ has averaged an 11.9% swing in the session subsequent to reporting. Based on the equity's near-term ATM straddle, the options market is pricing in a slightly smaller 11.1% move for this quarter. It appears option traders are expecting this move to resolve to the downside, considering CSIQ's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.41 rests in the 90th percentile of its annual range. Simply stated, puts have been bought to open over calls at a near-annual-high clip during the past 10 weeks. From a volatility perspective, those currently purchasing pre-earnings bets are willing to pay up. The equity's 30-day ATM IV of 75.6% sits higher than 88% of all comparable readings taken in the past year. On the charts, Canadian Solar Inc. has been losing ground since peaking above the round-number $40 mark in mid-May, down 40%. The equity is continuing this negative price action today -- off 2.1% at $24.23, and testing a foothold atop its year-to-date breakeven mark.
 

Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

 
Schaeffer's Daily Bulletin Offer
 


 


 
Special Offers from Schaeffer's Trading Partners