Calls Hot on Avis Budget Stock Pre-Earnings

CAR stock tends to make volatile post-earnings swings

Managing Editor
Aug 2, 2019 at 12:40 PM
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Car rental name Avis Budget Group Inc. (NASDAQ:CAR) is moving lower this afternoon, last seen down 3.3% at $34.13, as stocks suffer in the wake of global trade fears. Meanwhile, options traders are mostly likely gearing up for the company's second-quarter earnings report, slated for release after the market closes on Monday, Aug. 5. Below we will take a look at how CAR has been performing on the charts, and dive into what the options market is expecting for the stock's post-earnings moves.

Avis Budget stock enjoyed a bull gap back in mid-February, and since then the shares have made an inverse head-and-shoulders pattern -- typically viewed as a bullish signal. More recently, CAR shares have found a floor around the $34 level, now home to their ascending 100-day moving average. Year-to-date, CAR is up 52%.

Daily CAR with 100 MA

Moving onto Avis' earnings history, the stock has closed higher the day after earnings in just three of the past eight quarters, which includes the aforementioned 17.1% surge in February. On the flip side, the stock suffered a one-day, 15.2% plunge after earnings this time last year. Over the past two years, the shares have swung an average of 11.3% the day after earnings, regardless of direction. This time around, the options market is pricing in a similar 11.1% swing for Tuesday's trading. 

Digging deeper into options, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.41 ranks in the 12th percentile of its annual range. Not only does this show that call open interest outweighs put open interest among options expiring within three months, but such a call-skew among near-term traders is very rare. As far as front-month options go, the August 41 call is home to peak open interest among all series of options, with nearly 27,000 calls outstanding.

Echoing that, on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CAR sports a 10-day call/put volume ratio of 2.54 -- in the 82nd percentile of its annual range. This points to a much healthier-than-usual appetite for bullish options bets over bearish during the past two weeks.


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