Volatile Earnings History Draws Options Traders to Seagate Technology Stock

STX has had an outstanding year, picking up 65% in the past six months alone

Managing Editor
Jan 26, 2018 at 12:17 PM
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Among the plethora of names in the slew of earnings reports next week is hardware stock Seagate Technology PLC (NASDAQ:STX). The tech company is slated to report its fiscal second-quarter earnings before the bell on Monday. Below, we will take a look at how options traders are speculating ahead of the report, as well as how STX has been faring on the charts.

As an overview, Seagate stock has outperformed on the charts this past year. Picking up nearly 65% in the past six months alone, the tech name has managed to maintain its recent leg higher, following its early January bull gap above the support of its 10-day moving average. At last check, STX was up 1% to trade at $53.68, and just off a fresh two-year high of $54.29.

Looking at its earnings history, STX ended 12.6% higher the day after its last earnings report, and enjoyed upside one-day moves after four of the past eight earnings releases. Further, the shares have averaged a hefty post-event swing of 11.9% in either direction in the session after reporting, looking back two years. This time around, the options market is pricing in a smaller-than-usual 8% move for Monday's trading, per at-the-money implied volatility (IV) data.

In the options pits, sentiment has been leaning bearish in recent weeks. Data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), shows Seagate stock's 10-day put/call volume ratio of 1.27 in the 83rd percentile of its annual range. This suggests puts have been bought over calls at a faster-than-usual clip during the past two weeks.

What's more, STX's Schaeffer's put/call open interest ratio (SOIR) of 1.79 shows an unusual put-skew among near-term options traders, and currently ranks above 91% of all readings from the past year. An unwinding of these seemingly bearish positions could fuel upside for the stock. 

The security's short interest as fallen nearly 16% over the past two reporting periods, but still accounts for 12.4% of the stock's total available float. Plus, of the 22 analysts following the stock, 19 are carrying "hold" or worse recommendations. So a short-squeeze and/or bullish analyst attention are two catalysts that could keep the shares moving higher.

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