Earnings Preview: NQ Mobile Inc, Seadrill Ltd, and Splunk Inc

Analyzing pre-earnings option trends on NQ Mobile Inc (ADR) (NYSE:NQ), Seadrill Ltd (NYSE:SDRL), and Splunk Inc (NASDAQ:SPLK)

Karee Venema
Aug 26, 2015 at 1:49 PM
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Earnings season is winding down, but there are still a handful of high-profile names waiting in the wings. Internet issue NQ Mobile Inc (ADR) (NYSE:NQ), for example, will unveil its results tonight, while oil-and-gas name Seadrill Ltd (NYSE:SDRL) and software specialist Splunk Inc (NASDAQ:SPLK) are slated to step on stage tomorrow. Below, we'll take the pre-earnings temperature of NQ, SDRL, and SPLK.

  • Call buyers have been busy in NQ's options pits, per the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 206.64 -- in the top percentile of its annual range. With earnings on the very near horizon, those purchasing the stock's short-term options are paying a pretty penny, relatively speaking. Specifically, NQ's 30-day at-the-money (ATM) implied volatility of 114.8% sits higher than 81% of similar readings taken in the past year. Looking back over the past eight quarters, NQ has averaged a single-session post-earnings move of 6.5%, but this time around, the equity's near-term ATM straddle is pricing in a much larger 13.1% swing. Technically speaking, NQ Mobile Inc has been steadily losing ground since hitting a June 11 year-to-date high of $6.54, off 54% at $3.01.

  • Over the past eight quarters, SDRL has moved an average of 6.3% in the session subsequent to reporting, slightly less than the 8.5% the stock's near-term ATM straddle is calling for this time. Option traders, it seems, are expecting this action to occur to the downside, as evidenced by the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.60, which arrives north of 71% of all comparable readings taken in the last 12 months. Regardless, SDRL's short-term options are pricing in relatively high volatility expectations at the moment, considering the stock's 30-day ATM IV of 98.4% ranks in the 99th percentile of its annual range. On the charts, Seadrill Ltd has been following crude oil lower, down 82.2% year-over-year at $6.49. More recently, the stock has felt the heat of China's drastic currency moves.

  • Although SPLK has plunged 22.5% since hitting an annual high of $76.85 of July 24, the stock is attempting to find a foothold near its 320-day moving average, currently located at $59.80. In fact, SPLK is up 1.3% today to trade at $59.91. Option players have been rolling the dice on some post-earnings upside, and at the ISE, CBOE, and PHLX, SPLK's 10-day call/put volume ratio of 4.24 sits just 6 percentage points from a 12-month high. Volatility expectations are high ahead of earnings, per the equity's 30-day ATM IV of 66% -- in the 96th annual percentile -- and it appears they should be. Over the past eight quarters, Splunk Inc has averaged a single-session post-earnings swing of 10.7%. This time, the equity's near-term ATM straddle is pricing in a slimmer move of 9.3%.

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