Earnings Preview: Jabil Circuit, Inc. (JBL)

Jabil Circuit, Inc. (JBL) stock has been fighting overhead resistance for months, and option bears and short sellers are betting on a post-earnings slide

Dec 14, 2016 at 12:19 PM
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Apple Inc. (NASDAQ:AAPL) supplier Jabil Circuit, Inc. (NYSE:JBL) is set to report earnings tomorrow evening. While the stock has managed to recover from mid-May lows, short sellers and option traders are betting that the stock's recent stall-out will prevail, and send the shares spiraling lower after earnings.

At last check, JBL is up 0.3% at $21.69. The shares have been stuck below the $22-$22.50 area since their late-September post-earnings bear gap, and this area of resistance also halted JBL's early 2016 ascent. However, the $20.50 region has been providing support since August.


In the option pits, three of JBL's top four open interest positions are located at the 22-strike, which aligns with the recent resistance area, and confirms that the $22 level is one traders are watching. The January 2017 22 put, January 2017 22 call, and December 22 call together account for roughly 6,000 of JBL's 27,000 open contracts. The top front-month open interest position lies at the December 20 put, however, with more than 1,900 contracts outstanding.

Widening the scope, JBL's put open interest is in the 94th percentile of its annual range. What's more, JBL's Schaeffer's put/call open interest ratio (SOIR) of 0.94 sits in the 85th percentile of its annual range, indicating near-term option players have been more put-skewed than usual as of late. In addition, short sellers have been piling on, reinforcing this pessimism among investors. JBL's short interest is up 34.4% over the last two reporting periods, with shorted shares now accounting for 5.6% of JBL's float. It would take about four sessions of trading to cover these shorted shares, at JBL's average daily volume.

JBL has averaged a one-day post-earnings move of 5.8% over the past eight quarters, finishing in the red half the time. However, this time around, option players are pricing in a more drastic single-session swing of 9.8%. Regardless of where JBL lands, near-term option buyers are getting a relative bargain still, with Jabil Circuit, Inc.'s (NYSE:JBL) Schaeffer's Volatility Index (SVI) sitting at a relatively low 35%, in the 30th percentile of its annual range.

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