Earnings Preview: Pier 1 Imports Inc (PIR)

Bullish option players are betting on a post-earnings boost for Pier 1 Imports Inc (PIR)

Sep 27, 2016 at 11:37 AM
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Home retailer Pier 1 Imports Inc (NYSE:PIR) is set to report earnings tomorrow evening. While the stock has tended to move lower in the session after its earnings report -- ending the day in the red six of the last eight quarters -- this time around, option buyers seem to be betting on an upside swing.

PIR has averaged a one-day, post-earnings move of 10.1% over the last two years. Option players seem to be betting on a slightly less drastic move this time, with a 9.1% one-day swing in either direction being priced into PIR options, per implied volatility data.

In the option pits, total open interest is in the 91st percentile of its annual range, with calls nearly doubling puts. PIR's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) currently sits higher than 97% of all other readings from the past 12 months, with over four call options bought to open for every put, although average daily volume is light on an absolute basis.

Drilling down on front-month options, the top open interest position is the October 4 call, with the just-out-of-the-money October 5 call -- which saw the largest increase in open interest over the past ten days -- coming in a close second. These two strikes are now home to peak open interest in the front-month series.

On the other hand, while PIR's short interest fell by 6.5% during the past reporting period, shorted shares still account for 25.9% of PIR's float,. It would take four weeks of trading to cover these bearish bets, at PIR's average daily volume.

So far today, PIR is up 0.9% at $4.14. Although the stock has dropped by over 80% since flirting with decade-highs in mid-2013 --  ushered lower by their 10-month moving average , which has contained all but one monthly close since the beginning of 2014 -- the shares seem to have found a floor in the $3.75-$4 region, which contained Pier 1 Import Inc's (NYSE:PIR) early 2016 lows. In order to topple the trendline (at $5.25) this time around, the shares would have to jump nearly 27% by the end of the week.

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