LinkedIn Corp (LNKD) Option Bears Active as Earnings Loom

Bearish betting has hit fever pitch ahead of earnings from LinkedIn Corp (LNKD)

Oct 28, 2015 at 3:19 PM
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LinkedIn Corp (NYSE:LNKD) is set to follow social media peers Twitter Inc (NYSE:TWTR) and Yelp Inc (NYSE:YELP) into the earnings confessional tomorrow night. Judging by the latest trends in the options pits, speculators are rolling the dice on an earnings miss for LNKD.

On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a 10-day put/call volume ratio of 1.26. This ratio stands higher than 98% of all other readings from the past year, implying that traders have bought to open LNKD puts over calls at a near annual-high clip during the past two weeks.

As a result, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at a 52-week high of 1.33, suggesting near-term traders haven't been more put-biased during the past year. In fact, the November 160 and 180 puts saw the biggest open interest increases during the past two weeks, though much of that looks attributable to a notable bear put spread initiated on Monday.

Perhaps the speculator chose the bear put spread over simply buying the November 180 puts because LNKD's short-term options are relatively pricey at the moment. The equity's Schaeffer's Volatility Index (SVI) has jumped to 59% ahead of earnings -- higher than 76% of all other readings from the past year.

Historically, LNKD has dropped in the session after its last two earnings reports, and has averaged a one-day move of 11% going back eight quarters. This go-round, the options market is pricing in a milder 10% move in either direction, per the stock's near-term at-the-money straddle.

On the charts, LinkedIn Corp (NYSE:LNKD) has outperformed the broader S&P 500 Index (SPX) by nearly 11 percentage points during the past two months. Today, the shares are up 1.1% at $212.10, and have added 11.6% in October alone. However, the security is struggling to surmount its 160-day moving average, which acted as a ceiling during LNKD's July rally. Should the company unveil solid earnings tomorrow, though, an unwinding of pessimism in the options pits could propel the shares higher.


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