Earnings Preview: Vail Resorts, Inc. (MTN)

Vail Resorts, Inc. (MTN) stock has been on a tear upward for years, but option traders are betting on a post-earnings slide

Dec 8, 2016 at 12:08 PM
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As Vail Resorts, Inc. (NYSE:MTN) prepares to present earnings tomorrow morning, option traders will be watching closely. While the stock has been on an upward tear for years, MTN's put options have been heating up, with speculators gambling on -- or hedging against -- a pullback.

The day ahead of earnings, MTN is down 1.2% at $160.77. The stock has tacked on 25% since the beginning of 2016, and managed to notch a record high of $166.03 on Black Friday. Longer term, the shares have been ushered higher by their 20- and 32-week moving averages since mid-2014, more than doubling amid a series of higher highs.

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Just yesterday, MTN's put volume hit an annual peak, and the stock's total open interest is in the 97th percentile of its annual range, with 7,341 contracts -- 5,158 of which are puts. This penchant for puts isn't out of the ordinary for MTN option players-- MTN's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows nearly four puts bought to open for every call over the last 10 weeks, a reading that sits higher than 87% of all other readings from the last 12 months.

As a result, MTN's Schaeffer's put/call open interest ratio (SOIR) of 2.45 sits just 9 percentage points from an annual peak, indicating near-term option players have been especially put-heavy. Drilling down, the January 160 put is the top open interest position, with more-than-triple the number of contracts of the next top open interest option, at 2,103 -- 2,068 of which were added in the last two weeks, with buy-to-open activity detected. Today, MTN options are crossing at six times their average intraday rate, though absolute volume is still light, with just 594 puts and 283 calls crossing so far.

As for what tomorrow holds, MTN has averaged a one-day post-earnings swing of 3.6% in either direction over the last eight quarters. This time around, option players are pricing in a slightly larger move of 4.6%. For the last two years, Vail Resorts, Inc. (NYSE:MTN) shares have finished in the red four times after reporting earnings, and last quarter specifically, MTN fell 3% in the session after earnings. 

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