Earnings Preview: Valeant Pharmaceuticals Intl Inc (VRX)

Valeant Pharmaceuticals Intl Inc (VRX) will finally release its fourth-quarter earnings results tomorrow

Mar 14, 2016 at 4:04 PM
facebook X logo linkedin

Biotech Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has been one of the most closely watched stocks on Wall Street in 2016 -- and not for good reason. There have been a series of missteps for the firm this year, not least of which was postponing its fourth-quarter earnings release. Well, VRX is finally ready to unveil its quarterly results ahead of the bell tomorrow, so let's see how traders both in and out of the options arena are preparing for the event. 

In the options pits, call buying has been more popular than put buying at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) leading up to the event. This is evidenced by VRX's 10-day call/put volume ratio of 1.19.

The stock's Schaeffer's put/call open interest ratio (SOIR), meanwhile, shows a near-even split between calls and puts in the stock's front three-months' series of options, coming in at 1.01. However, this SOIR arrives in the 15th percentile of its annual range, meaning short-term options traders are much more call-heavy than what's normally seen. 

Today, where call volume ran at an accelerated clip. The most popular option was the March 70 call, which apparently saw buy-to-open activity. By initiating long positions here, speculators are betting on a move back atop $70 from the shares before the front-month contracts expire at Friday's close. 

Usually ahead of such a high-profile event like an earnings release, a stock's near-term options will show inflated premiums, as volatility expectations rise. However, VRX's Schaeffer's Volatility Index (SVI) of 82% lands in just the 52nd percentile of its annual range. So from a volatility perspective, considering that earnings will be released tomorrow, the stock's options can be had at reasonably fair prices.

Then again, VRX's post-earnings moves in the past haven't been too extreme. Looking back six quarters, the stock's posted an average swing of 5% in sessions immediately following earnings. This time around, the options market is pricing in a much greater swing of nearly 19% for tomorrow's trading! 

On the charts, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is still trying to recover from its late-2015 slide, which began with Citron Research's damning short-seller report. The stock shed 0.7% today to settle at $69.04, bringing its losses to 53% since the report was released. 

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI