Earnings Preview: AutoZone, Inc. (AZO)

Bearish option players are betting on a post-earnings slide for AutoZone, Inc. (NYSE:AZO)

by Celeste Taylor

Published on Sep 21, 2016 at 12:35 PM
Updated on Sep 21, 2016 at 12:35 PM

Following in the footsteps of its sector peer CarMax, Inc (NYSE:KMX), AutoZone, Inc. (NYSE:AZO) is set to report earnings tomorrow morning. While the stock has moved higher in the session after its last three earnings reports, option buyers are betting on a downside move for the auto stock.

The stock's average one-day, post-earnings swing over the past two years has been 2.4%, with five of the last eight quarters being positive. This time around, traders are pricing in a 4.2% post-earnings move, per implied volatility data, and option speculators today are scooping up puts at a faster-than-usual clip.

Specifically, AZO puts are crossing the line at about 1.57 times their average intraday clip, with put volume on pace for the 96th percentile of its annual range. Plus, the put/call volume ratio of 1.64 is higher than 93% of all other readings from the past year, pointing to a healthier-than-usual appetite for puts over calls today.

Echoing that, AZO's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 1.41 is in the 82nd percentile of its annual range, indicating a bigger-than-usual affinity for long puts over calls during the past two weeks.

At last check, AZO has added 0.2% to sit at $745.79. The stock recently breached its formerly supportive 320-day moving average, which now looks to be serving as a resistance. In addition, the once-supportive, round-number $750 level also appears to be containing the shares, creating a second layer of resistance overhead. Even if the shares manage to break through, however, the $820 level marked a double-top in June and July.

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