Options Traders Not Deterred By Schlumberger Earnings History

Schlumberger was negative post-earnings seven of the last eight times

Patrick Martin
Jul 20, 2017 at 1:07 PM
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Oil-and-gas company Schlumberger Limited (NYSE:SLB) is set to report its second-quarter earnings tomorrow, and investors are keeping their eye trained on the energy name, which has a lackluster history in the earnings spotlight. Below, we will take a look at Schlumberger stock's performance on the charts, and how SLB options traders are speculating ahead of tomorrow's earnings release. 

SLB stock is down 0.4% at $67.41, and has recently run into its 40-day moving average. That trendline has acted as stiff resistance for the majority of 2017. SLB shares have had a rough year, shedding 20% year-to-date, and recently falling to an annual low of $64.15 on July 7. The shares were hit with a round of analyst downgrades a few weeks ago, but have since attempted to stage a rebound in step with oil futures. 

jul 20 slb

Schlumberger stock's poor performance post-earnings could give investors pause. While SLB stock has averaged a one-day move of only 2% in either direction following the last eight earnings releases, the shares have made a negative one-day post-earnings move in seven of the last eight quarters. This time around, near-term options traders are betting on a larger-than-usual swing of 3.2%, based on at-the-money implied volatility data.

Despite the stock's earnings history, options traders have been picking up bullish bets over bearish at an accelerated clip. SLB stock has racked up a 10-day call/put volume ratio of 1.88 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 83rd percentile of its annual range. This means calls are being bought to open over puts at nearly 2-to-1 ratio. 

In fact, SLB's call open interest is nearing an annual high, with 216,860 contracts outstanding, ranking in the 99th percentile of its annual range.  In the soon-to-expire front-month series, the July 70 call is home to peak open interest, with over 12,000 contracts outstanding. Over the past 10 days, though, the out-of-the-money weekly 7/28 69-strike call has seen a notable open interest increase, with more than 2,200 contracts added.

Should Schlumberger once again turn lower after earnings, a mass exodus of options bulls could exacerbate the stock's slide. What's more, 60% of analysts covering SLB stock rate it a "buy" or better. A round of downgrades could also fuel further losses for the shares, should the energy company disappoint tomorrow.


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