Options Pricing in Bigger-Than-Usual Earnings Move for Steel Stock

Schnitzer Steel is set to report its fiscal second-quarter earnings tomorrow morning

Managing Editor
Apr 4, 2018 at 12:05 PM
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Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is set to report its fiscal second-quarter earnings tomorrow before the stock market opens. Over the past eight quarters, the stock has swung 4%, on average, in either direction in the session after the company reported. This time around, the options market is pricing in a larger-than-usual 6.4% next-day move, per Trade-Alert.

Currently, Schnitzer Steel stock's Schaeffer's put/call open interest ratio (SOIR) of 0.85 is in the 97th percentile of its annual range. Though the ratio indicates that short-term calls still outnumber puts on an absolute basis, the elevated percentile indicates that near-term traders have rarely shown a greater preference for puts over calls in the last year.

Schnitzer Steel stock has pulled back since its mid-March highs, and today, the shares are on pace to close a third straight day beneath their 120-day moving average -- something we haven't seen since June 2017. Today, SCHN has reversed early losses to trade up 0.5% at $32.10, at last check. The $31 level has emerged as a foothold for the shares in 2018, and corresponds with a roughly 50% year-over-year gain.

Lastly, short interest on SCHN rose 12.7% during the two most recent reporting periods, and now represents nearly 10% of the stock's total available float. At the Schnitzer Steel stock's average daily trading volume, it would take exactly nine days for the shorts to cover their bearish bets.

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