Visa Call Options Hot Ahead of Earnings

Options traders have been purchasing Visa call options at more than triple the pace of put options

Managing Editor
Jul 24, 2018 at 11:53 AM
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Financial services concern Visa Inc (NYSE:V) is up 1% at $141.16 this afternoon, and earlier revisited Friday's record high of $141.47. This surge comes after brokerage firm Raymond James this morning resumed coverage on the Dow stock with an "outperform" rating and $165 price target, and the company announced a partnership with MoneyGram to simplify overseas money transfers.

Longer-term, shares of Visa stock have been trending higher since 2011, with a few pullbacks this year caught by support at the 120-day moving average. V has picked up 41% over the past 12 months, and traders are betting on the positive price action to continue after the credit card concern's highly anticipated earnings report.

Daily Chart of V 2 with 120MA

The financial name is slated to report fiscal third-quarter earnings after the market closes this Wednesday, July 25. Digging into its earnings history, V stock has closed higher the day after five of its last eight earnings reports, capped off by a 4.8% swing higher in April. On average, the shares have moved 2.3% in the post-earnings session over this two-year time frame, regardless of direction. This time around, the options market is pricing in a larger-than-usual 4.3% next-day move for Thursday's trading.

Digging into Visa options, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the stock with a 10-day call/put volume ratio of 3.10, which ranks in the 94th percentile of its annual range. In other words, calls have been purchased over puts at a faster-than-usual clip.

Echoing this, Visa stock's short-term traders are more call-skewed than usual, with V's Schaeffer's put/call open interest ratio (SOIR) of 0.33 ranking in the lowest possible percentile of its annual range. This indicates that near-term call open interest outweighs put open interest by a wider-than-usual margin right now. 

Digging deeper, the Dow name's out-of-the-money August 150 call saw the largest increase in open interest during the past two weeks of trading, adding more than 14,300 contracts. Some of this activity has been buyer-initiated, indicating options traders expect Visa stock to break further into record high territory in the near future.


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