Options Traders Eye Huge Post-Earnings Swing for Mobileye Stock

Self-driving tech specialist Mobileye NV (NYSE:MBLY) is up 0.8% at $46.02 on news the company is teaming up with German carmaker BMW to create high-definition maps that will aid in camera-based driver assist technology in future cars. MBLY stock is no stranger to gains, as the shares have tacked on nearly 35% over the past two months, attracting the attention of bullish options traders. But the company is due to report earnings before the open tomorrow, and MBLY has a history of disappointing post-earnings moves.

Specifically, over the past eight quarters, MBLY shares have moved to the downside in the session after reporting five times, including the last three quarters in a row. The stock tends to make relatively muted moves, averaging a one-day swing of just 2.3% in either direction. But options traders appear to be eyeing a more dramatic result this time, pricing in a 9.5% move for Wednesday.

Options Traders Prefer MBLY Calls 

Drilling down, MBLY calls and puts are both trading hands at five times the expected intraday pace, with calls leadings puts 27,000 to 19,000. Most popular so far are the April and March 55 calls, with more than 4,900 contracts apiece on the tape, and a mix of buying and selling action spotted at both. Call buyers are betting on MBLY shares rallying above $55 -- territory not seen on a closing basis since August 2015 -- by the respective options expiration dates, while call sellers expect the out-of-the-money strike to serve as a ceiling.

Taking a step back, today's preference for MBLY calls is nothing new. Over the past 10 days on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has seen 1.44 calls bought for each put. Over the same period, the March 48 call has seen the largest rise in open interest, with the major exchanges suggesting a large portion of these positions were bought to open. Notably, it remains an attractive time to pick up short-term options, as MBLY's Schaeffer's Volatility Index (SVI) of 44% is docked in the low 17th percentile of its annual range, indicating low volatility expectations are being priced in, even with earnings due tomorrow.

Analysts, Shorts Diverge on MBLY Opinions

The popularity of buying out-of-the-money calls may be explained outside of the options pits, however. Short interest on MBLY represents more than 16% of the equity's available float -- two weeks' worth of purchasing power, at the stock's average daily volume. It's likely some short sellers may be picking up protective calls ahead of tomorrow's earnings to hedge against an upside surprise.

Meanwhile, analysts are quite upbeat toward Mobileye NV (NYSE:MBLY). Out of 19 firms providing coverage, 15 rate the shares a "buy" or better, while not one has handed out a "sell" opinion. Plus, the average 12-month price target of $55.65 sits at a 20.9% premium over current levels. This could spell trouble, should MBLY earnings disappoint, as a round of downgrades and/or price-target cuts could put additional pressure on the stock.