2 Apple Suppliers Ready for the Earnings Confessional

Both companies report after the close on Wednesday, Aug. 1

Managing Editor
Jul 31, 2018 at 2:53 PM
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In addition to Apple's (AAPL) big quarterly report after the close today, two Apple suppliers will step into the earnings confessional after the close tomorrow, Aug. 1. While Cirrus Logic, Inc. (NASDAQ:CRUS) and Qorvo Inc (NASDAQ:QRVO) stocks have moved in opposite directions after the past couple of earnings reports, options traders are coming out in droves for both chip names.

Cirrus Stock Has an Ugly Post-Earnings History

For Cirrus, the options market is pricing in a larger-than-usual 12.3% next-day swing, regardless of direction. This compares to the 6.6% single-session post-earnings move the shares have averaged over the past eight quarters -- where the past four have been negative. Last August, CRUS stock dropped nearly 7% the day after reporting. 

Options traders have been targeting Cirrus calls at a tremendous rate lately, though. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 3.91, ranking in the 88th percentile of its annual range, indicating calls have been bought over puts at a faster-than-usual clip during the past two weeks.

Shifting gears to today, though, despite relatively low absolute volume, CRUS puts are trading at nearly two times what's typically seen at this point in the day, with nearly 700 contracts exchanged. Most popular today are the September 30 and 45 calls, although the weekly 8/3 41-strike put also has new positions being opened. In that case, buyers of the puts are banking on another post-earnings dip from Cirrus by the time the options expire this Friday.

Looking at the charts, Cirrus stock is up 3% to trade at $43.02 today, set for its highest close since March. The Apple supplier has rallied nicely from its late-April lows near the $35 area, guided by its 50-day moving average -- a trendline that previously acted as resistance earlier this year. Nevertheless, CRUS is still staring at a 17% deficit for 2018. 

Daily Stock Chart CRUS

Call Buyers Flocking to QRVO Stock

Looking at Qorvo, the options market is also pricing in a larger-than-usual 10.7% next-day swing, regardless of direction. This compares to the 5.4% single-session post-earnings move the shares have averaged over the past eight quarters. Unlike Cirrus, though, the past two post-earnings reactions have been positive for QRVO, including a 16.1% burst in February.

Ahead of the event, call traders are coming out in droves. Over 3,200 QRVO calls have changed hands today -- six times what's typically seen at this point, and volume pacing for the 96th percentile of its annual range. Most popular today is the the August 90 call, although it looks like one trader may be rolling down their front-month calls for the September 85 calls.

Whatever the motive, today's appetite for short-term calls is par for the course. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.32 ranks in the 4th percentile of its annual range, indicating that open calls handily outnumber puts among options expiring within three months -- and near-term traders have rarely been more call-biased in the past year.

Qorvo stock is up 1.3% to trade at $81.83, at last check, and boasts a 23% lead in 2018. However, the Apple supplier has spent the summer months consolidating between the $78-$84 levels following a post-earnings rally in early May.

Daily Stock Chart QRVO

 

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