Autodesk Put Options in High Demand Ahead of Earnings

The implied volatility skew on short-term ADSK options is nearing annual highs

Managing Editor
Nov 27, 2017 at 3:02 PM
facebook twitter linkedin


While most of the bigger names have come and gone for the quarter, some companies have yet to take their turn in the earnings confessional. Software developer Autodesk, Inc. (NASDAQ:ADSK) is due up this week, reporting third-quarter earnings after the market closes this Tuesday, Nov. 28. Here's a closer look at ADSK's performance lately, and how options traders are playing the software name ahead of earnings.

It's been an outstanding year for Autodesk stock. The software name has added 75% year-to-date, with a few minor pullbacks over the last year contained by its rising 80-day moving average. Earlier today, ADSK touched a new all-time high of $130.92, and has more than tripled from its February 2016 lows around $42.

Autodesk Stock Chart

ADSK tends to make big moves after earnings, but -- over the past eight quarters -- the stock's next-session returns have been evenly split between gains and losses, with four of each. Overall, Autodesk stock has averaged a one-day post-event move of 5.2%, ranging from a 14.7% rally last May to a 3.5% drop in November 2016. This time around, the options market is pricing in a larger-than-usual one-day swing of 9.9%, per Trade-Alert.

And recent volume data points to a bearish trend among ADSK options traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ADSK sports a 10-day put/call volume ratio of 2.91, which ranks in the 93rd percentile of its annual range. In other words, traders have been buying to open puts at an unusually rapid pace relative to calls in the days leading up to Autodesk's earnings report.

The most popular short-term put over this two-week time frame has been the weekly 12/1 124 strike, with 1,422 contracts added -- accounting for nearly all of the 1,424 contracts in open interest at this out-of-the-money strike. From its current price of $129.67, ADSK would need to fall about 4.4% by the end of the week for these 124-strike puts to expire in the money this Friday.

Shifting gears to today, roughly 18,000 options have changed hands on ADSK -- five times what's typically seen at this point in the day, with volume pacing in the 98th annual percentile. And volatility expectations are ramping up right alongside Autodesk option volume. Trade-Alert data shows the 30-day implied volatility skew of 11.7% registering in the 94th annual percentile, as ADSK puts have rarely priced in greater volatility premiums than their call counterparts.

Winning With Weekly Options

1606854690

  


 
Special Offers from Schaeffer's Trading Partners