Under Armour Options Traders Eye Another Post-Earnings Pop

Short interest on UAA surged during the past two reporting periods

by Emma Duncan

Published on Jul 29, 2019 at 11:24 AM
Updated on Jul 29, 2019 at 11:49 AM

Athletic apparel retailer Under Armour Inc (NYSE:UAA) is trading slightly lower today at $27.12, as options traders gear up for the company's upcoming second-quarter earnings report. Set to debut before the open tomorrow, Tuesday, July 30, the report comes on the heels of UAA's recent multi-month climb up the charts.

The retail stock is now up 53% year-to-date, thanks to a pair of trendlines that have worked as both long- and short-term support for the shares. The 160-day trendline captured the stock's multiple pullbacks between March and May, while the 30-day moving average has acted as a springboard for UAA since late May. In fact, just this past Thursday, July 25, the shares touched a two-year high of $27.72.

Daily UAA with 30 and 160MA Since Jan

Moving onto Under Armour's earnings history, the stock has closed higher the day after earnings in the past six straight quarters -- including a 27.7% surge in October. Over the past two years, the shares have swung an average of 11.7% the day after earnings, regardless of direction. This time around, the options market is pricing in a much larger-than-usual 16.1% swing for Tuesday's trading. 

Switching gears, looking at options suggests a heightened preference for calls. Specifically, UAA's 10-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 8.26, and ranks in the 98th annual percentile. Seeing the largest increase in open interest during this time frame is the September 30 call, with over 10,000 contracts added.

Further, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.56 ranks in the bottom percentile of its annual range. Not only does this show that call open interest among options expiring within three months outweighs put open interest by a more than 8-to-1 ratio, but such a call-skew for near-term traders is very rare. 

Short interest rose 21.8% during the past two reporting periods, and now accounts for 21.1% of the stock's total available float. At Under Armour stock's average pace of daily trading, it would take shorts nearly nine days to buy back their bearish bets -- plenty of sideline cash to fuel a post-earnings pop.

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