Earnings Preview: UnitedHealth Group Inc, Goldman Sachs Group Inc, and Citigroup Inc

Analyzing recent option activity ahead of earnings on UnitedHealth Group Inc (NYSE:UNH), Goldman Sachs Group Inc (NYSE:GS), and Citigroup Inc (NYSE:C)

Oct 14, 2015 at 1:16 PM
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The Dow is decidedly lower this afternoon, as a disappointing forecast from blue-chip Wal-Mart Stores, Inc. (NYSE:WMT) weighs on investor sentiment. While WMT won't unveil its final results until later this season, index peers UnitedHealth Group Inc (NYSE:UNH) and Goldman Sachs Group Inc (NYSE:GS) will take their turns in the earnings confessional tomorrow morning. Joining them will be financial firm Citigroup Inc (NYSE:C). Below, we'll take the pre-earnings temperature of UNH, GS, and C.

  • Put buyers have been increasing their presence on UNH ahead of earnings, per the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.50 -- in the 87th annual percentile. In other words, puts have been bought to open over calls at a faster-than-usual clip. Technically speaking, UNH has put in a strong performance in 2015 -- up 20% at $121.84 -- making it possible that some of the recent put buying is a result of shareholders protecting paper profits.

    Regardless, premium on the equity's near-term options is still relatively inexpensive, per UNH's Schaeffer's Volatility Index (SVI) of 25%, which sits lower than 66% of all comparable readings taken in the past year. Looking back over the past eight quarters, UnitedHealth Group Inc has averaged a single-session post-earnings move of 3% -- roughly in line with the 3.3% the stock's near-term at-the-money (ATM) straddle is pricing in this time around.

  • GS is making waves today, amid reports the bank is being investigated as part of a wider Malaysian money-laundering probe. At last check, the stock is off 0.5% at $179.99 -- widening its year-to-date deficit to 7.1%. The security could see a little more action tomorrow, considering its near-term ATM straddle is pricing in a 2.5% single-session post-earnings move -- a wider swing than the 1.3% GS has averaged over the last eight quarters. Option traders, meanwhile, have been lining up on the bullish side of the fence ahead of earnings, per GS' 10-day ISE/CBOE/PHLX call/put volume ratio of 2.12 -- in the 88th annual percentile. Those purchasing Goldman Sachs Group Inc's short-term options are paying relatively tame premiums, historically speaking, as its SVI of 23% rests below 67% of comparable readings taken in the past 12 months.

  • Over the last eight quarters, C has moved an average of 3.2% in the session subsequent to reporting, and the options market is expecting more of the same this time around. -- per the security's near-term ATM straddle. Speculators are expecting this action to resolve to the downside, based on C's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.92, which sits just 2 percentage points from a 52-week peak. Meanwhile, the security's SVI of 26% ranks lower than 60% of similar readings taken in the past 12 months. On the charts, Citigroup Inc has surrendered over 6% in 2015 -- including today's sector-related 1% drop that has the stock circling around $50.72.
 

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