Put Buyers Blast VF Corp Ahead of Earnings

Bearish betting has ramped up on VFC recently

by Patrick Martin

Published on Jan 17, 2019 at 11:45 AM

Earnings season is hitting high gear, and one of the first retail names due up is VF Corp (NYSE:VFC), scheduled to report its fiscal third-quarter earnings before the open tomorrow, Jan. 18. VFC is known for making volatile moves after its quarterly reports, and the options market is expecting more of the same in Friday's session.

Specifically, Trade-Alert places the implied earnings deviation for VF Corp at 7.9% -- more than the 5.6% next-day move the stock has averaged over the last two years. During this eight-quarter span, it's been 50-50 as to whether these earnings reactions were positive or negative, and only two have been large enough to match or exceed what the options market is pricing in this time around (a 10.7% drop in October, and an 11.1% plunge last February).

On the charts, VFC rallied off its Dec. 26 low near $67, but last week was turned away at the $75 level. This area coincides with the stock's 40-day moving average and a 50% Fibonacci retracement of its December drop. Today, the stock is up 0.4% to trade at $72.20.

Daily Stock Chart VFC

On the sentiment front, most analysts are bullish on the retail stock, , with 12 of 17 in coverage rating it a "buy" or better, and zero "sells" on the books. However, it looks like some brokerages are starting to adjust to VFC's weak price action, with Cowen earlier cutting its price target to $95 from $106.

Options traders have been positioning for a downside move. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows VFC's 10-day put/call volume ratio of 3.20 ranks in the 92nd annual percentile. 

Echoing this, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.72 ranks in the 91st percentile of its annual range. This points to a heavier-than-usual put-skew among short-term options traders.

Drilling down, the bulk of this activity is centered at the January 2019 72.50-strike put, which is home to VFC's top open interest position. Data from the major exchanges confirms buy-to-open activity here, meaning options traders expect the stock to settle below the strike at tomorrow's close.


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