Earnings Preview: SINA Corp, Lowe's Companies, Inc., and American Eagle Outfitters

Analyzing pre-earnings option trends on SINA Corp (NASDAQ:SINA), Lowe's Companies, Inc. (NYSE:LOW), and American Eagle Outfitters (NYSE:AEO)

Aug 18, 2015 at 12:31 PM
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Although earnings season is winding down, there are still a number of notable names waiting in the wings to report. Specifically, Chinese Internet issue SINA Corp (NASDAQ:SINA) will step up to the plate after tonight's close, while retailers Lowe's Companies, Inc. (NYSE:LOW) and American Eagle Outfitters (NYSE:AEO) are slated to report bright and early tomorrow morning. Below, we'll take the pre-earnings temperature of SINA, LOW, and AEO.

  • SINA is struggling today -- along with a number of its fellow China peers -- after the Shanghai Composite took a sharp tumble overnight. At last check, the stock was off 2% at $39.22. This negative price action is just more of the same for an equity that's shed 36% since topping out at an annual high of $61.25 in mid-June, and, more recently, found an overhead ceiling at the round-number $40 mark. Option traders, meanwhile, have been rolling the dice on additional losses. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SINA's 10-day put/call volume ratio of 0.94 ranks in the 76th annual percentile. Simply stated, puts have been bought to open over calls at a faster-than-usual clip. Looking back over the past eight quarters, SINA Corp has averaged a single-session post-earnings move of 3.2%. This time -- based on the security's near-term at-the-money (ATM) straddle -- the options market is expecting a bigger swing of 7.6%.

  • LOW is getting a lift today from sector peer Home Depot Inc's (NYSE:HD) solid turn in the earnings confessional, as well as the latest round of upbeat housing data. Most recently, the shares were up 1% at $73.22 -- widening their year-to-date lead to 6.4%. In the options pits, put buying has been popular in recent months. Specifically, the stock's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.06 sits higher than 72% of all similar readings taken in the past year. Meanwhile, with uncertainty swirling ahead of tomorrow's quarterly results, the stock's near-term options are pricing in relatively high volatility expectations at the moment. In fact, the equity's 30-day at-the-money implied volatility of 24% rests in the 90th percentile of its annual range. Historically speaking, Lowe's Companies, Inc. (NYSE:LOW) has moved an average of 3.5% in the session subsequent to reporting, over the past eight quarters -- slightly less than the 4% the security's near-term ATM straddle is projecting for tomorrow's trading.

  • WMT's poorly received earnings report is having little effect on AEO today, with the shares hitting a two-year high of $18.49 earlier. Longer term, the stock has rallied more than 32% in 2015 to trade at $18.36. The security could see some volatile trading in tomorrow's session, considering AEO has averaged a single-session post-earnings swing of 7.7% over the past eight quarters. This time, the options market is pricing in a slightly larger 8.6% move, based on American Eagle Outfitters' near-term ATM straddle. Option traders are expecting this action to resolve to the upside, and at the ISE, CBOE, and PHLX, they have bought to open 5.89 calls for each put over the past 50 sessions. What's more, the resultant call/put volume ratio ranks just 4 percentage points from a 52-week peak.
 

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