Earnings Preview: Verizon Communications Inc., Microsoft Corporation, and Advanced Micro Devices, Inc.

Verizon Communications Inc. (NYSE:VZ), Microsoft Corporation (NASDAQ:MSFT), and Advanced Micro Devices, Inc. (NASDAQ:AMD) will each report quarterly earnings on Thursday

Oct 18, 2016 at 1:31 PM
facebook twitter linkedin

Blue-chip earnings are in the spotlight this week, with the latest quarterly results from big bank Goldman Sachs Group Inc (NYSE:GS) dominating today's headlines. Looking ahead, fellow Dow components Verizon Communications Inc. (NYSE:VZ) and Microsoft Corporation (NASDAQ:MSFT) will be joined at the earnings altar on Thursday by chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD). Here's a closer look at how each stock has been performing on the charts, and how options traders are lining up their pre-earnings bets.

Verizon Communications Inc. (NYSE:VZ)

Short-term VZ options traders have shown a preference for calls over puts, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.57, which ranks in the low 16th percentile of its annual range. In the front-month series, peak open interest of 49,565 contracts is located at VZ's October 55 call. At the major options exchanges, the action here has been pretty evenly split on the short and long side in recent months. Those buying to open the calls are betting on a breakout above $55 by this Friday's close -- when the series expires -- while those selling to open the calls expect the strike to serve as a near-term ceiling.

On the charts, VZ is up 9% on the year. More recently, the stock has been sticking close to the round $50 mark -- which coincides with a 50% retracement of VZ's January low at $43.79 and July high at $56.95 -- as the fallout from Yahoo! Inc.'s (NASDAQ:YHOO) hacking scandal continues. VZ -- which has agreed to purchase YHOO's core assets -- will likely be in focus tomorrow, after Yahoo unveils its quarterly results. Ahead of this event, and Verizon Communications Inc.'s own Thursday morning announcement, both stocks are trading higher, with VZ stock last seen up 0.1% at $50.49.

Microsoft Corporation (NASDAQ:MSFT)

Near-the-money calls expiring at this Friday's close nearly double puts in MSFT's options pits, per the stock's front-month gamma-weighted SOIR of 0.57. Drilling down, the security's October 60 call has garnered the most interest, and is home to 102,720 contracts outstanding -- the most of any MSFT option. It looks as if the majority of the action here has been of the sell-to-open kind, per the major options exchanges, meaning the $60 mark has been targeted to serve as a ceiling for the shares through this Friday's close.

Looking at the charts, MSFT has never explored the north side of $60, with its December 1999 record peak docked just three pennies south of here. More recently, the stock has stalled out near the $59 mark. This isn't to say that MSFT hasn't put in a strong technical performance of late, with the shares up 20% from their late-June lows near $48, at $57.78. Plus, the shares of Microsoft Corporation appear to have found a firm layer of support near $56 -- site of their late-July earnings-induced bull gap close -- and notched a 16-year peak of $58.70 on Aug. 26. MSFT will report earnings after Thursday's close.

Advanced Micro Devices, Inc. (NASDAQ:AMD)

AMD's results are also due Thursday evening, and speculators have shown a preference for calls over puts. In fact, more than 561,100 calls are currently open on AMD -- in the 98th annual percentile -- compared to around 385,000 puts. It's a trend especially evident in the monthly October series, per AMD's front-month gamma-weighted SOIR of 0.49. It appears a number of these speculators are using calls to profit on the stock's historical struggles in the $7-$7.50 range.

And while AMD has battled with this region for a number of years, the stock has rallied hard off its late-January low at $1.75 -- surging nearly fourfold at $6.82. Plus, Advanced Micro Devices, Inc. hit a four-year peak of $8 on Aug. 19. AMD could see some volatile trading on Friday, too, as it has averaged a single-session post-earnings swing of 12.5% in the last eight quarters. Call writers could be on notice, too, considering in the past two quarters, AMD stock has averaged a 32.1% gain in the session subsequent to reporting.

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!

Now is the time to join our thriving community of Event Traders who consistently profit from every earnings season. With this discounted subscription opportunity, you'll stay ahead of the curve and seize opportunities others miss. Do not let Q3 earnings season pass you by – subscribe now and supercharge your portfolio with expert insights that turn market reactions into profit-generating opportunities!! Don't waste another second... join us right now before the next trade targeting +200% is released!