Pre-Earnings Options Bulls Flock to Lululemon Stock

Call buying has been more popular than usual in recent weeks

Managing Editor
Mar 26, 2019 at 2:21 PM
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Yoga apparel retailer Lululemon Athletica inc. (NASDAQ:LULU) is down 1.1% at $145.03 in afternoon trading, as traders gear up for the company's fourth-quarter earnings -- set for release after the market closes tomorrow, March 27. Below, we will take a look at dig into how LULU has been faring on the charts, and see what the options market is pricing in for the stock post-earnings.

Lululemon Athletica stock has added an impressive 20.5% in 2019, and touched a four-month peak of $158.67 on Feb. 13. However, a pullback from here has the shares below their 50-day moving average, which ushered LULU lower in the fourth quarter.

Daily LULU with 50MA

Looking into LULU's earnings history, the retail stock has closed higher the day after its quarterly report in all but two of the past eight quarters, including a 16.3% surge last June. Over the past two years, the shares have swung an average of 12.6% the day after earnings, regardless of direction. This time around, the options market is pricing in a larger-than-usual 16% move for Thursday's trading.

Moving onto options data, LULU's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at a top-heavy 1.28, and ranks in the 61st percentile of its annual range. This suggests calls have been purchased over puts at a slightly faster-than-usual pace during the past two weeks.

Echoing this sentiment is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.84, which ranks in the 24th percentile of its annual range. This shows a stronger-than-usual call-skew among near-term options. The April 150 call has been particularly popular among call buyers, and is home to peak open interest on LULU stock.

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