Big Pre-Earnings Options Bets On Exxon Mobil Corporation and Pfizer Inc.

XOM and PFE will step up to the earnings mic tomorrow morning

Jan 30, 2017 at 2:53 PM
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Dow stocks Exxon Mobil Corporation (NYSE:XOM) and Pfizer Inc. (NYSE:PFE) will head to the earnings confessional tomorrow morning. Ahead of the big quarterly events, shares of both blue chips are down. Below, we'll take a closer look at how each one could swing in the aftermath of their earnings reports, and how options traders have been positioning themselves in advance.

XOM has finished lower in the session subsequent to earnings in five of the past eight quarters. If the stock suffers another post-event dip, it would represent the continuation of a weeks-long downtrend. Since its near-term high in December at $93.22, the shares have dropped over 9% -- last seen off 1.1% at $84.54. In fact, Exxon is now in danger of breaching support at its 320-day moving average.

xom daily jan 30

In spite of its recent technical troubles, the stock has been on the receiving end of options optimism. In the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.81 XOM calls for every put -- a ratio that ranks in the bullishly skewed 94th annual percentile. Along similar lines, short interest pulled back nearly 20% in the last two reporting periods, leaving less than 1% of the stock's float dedicated to these bearish bets.

Things are different this afternoon, however. Exxon Mobil Corporation puts outnumber calls, while trading at double the expected intraday rate. Trade-Alert suggests buy-to-open activity is transpiring at the weekly 2/3 84.50-strike put -- including a sweep of 8,759 contracts -- as well as the April 90 put. In other words, these groups of speculators are bracing for post-earnings turbulence.

PFE has experienced trouble after recent quarterly reports, as well. Specifically, the stock has dipped in the session subsequent to earnings five times in eight quarters. Speaking more broadly, the shares have been reeling since their early August high at $37.39, last seen off 0.9% at $31.13 -- about flush with a key technical level.

Given this backdrop, it's no surprise to see bearish betting has accelerated in the options arena. PFE sports a 10-day ISE/CBOE/PHLX put/call volume ratio of 0.78, in the bearishly biased 81st percentile of its annual range.

But pre-earnings traders are having what looks like a change of heart. Pfizer Inc. calls are changing hands at about triple the usual intraday clip, thanks to several monster transactions. It looks like a nearly 16,100-contract block was traded, possibly as part of a short-term buy-write strategy, at the weekly 2/3 31.50 strike. A more pure speculative play may have been initiated at the February 32 call, where it seems a sweep of 12,832 contracts was purchased in hopes of a near-term bounce.

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