ULTA Shares Feel Long-Term Support Before Earnings

Ulta put options have been popular recently

by Josh Selway

Published on Aug 22, 2019 at 2:07 PM

Ulta Beauty Inc (NASDAQ:ULTA) is trading up 2.2% today at $335.47, testing its 20-day moving average. However, we're more interested in a longer-term trendline, that being the 10-month moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, the previous 10 signals of this type have resulted in an average one-month gain of 9.9%, and the three-month gain was almost 18% on average. Plus, seven out of 10 sparked positive returns a month out. This bullish setup comes a week ahead of earnings, and options traders are taking action.

ulta stock price aug 22

Jumping in to today's trading, puts have already surpassed their daily average, and are on pace to more than double it by the close. Most popular is the weekly 8/23 327.50-strike put, followed by the 325-strike put from the same series. The options are set to expire at tomorrow's close.

More broadly speaking, traders have been betting bearishly on the cosmetics stock at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The 10-day put/call volume ratio is 1.52 at these exchanges, good enough for the 98th annual percentile. Peak open interest on Ulta is at the September 330 put. However, volatility expectations are already rising, with the 30-day at-the-money implied volatility of 41.9% ranking in the 88th annual percentile.

Based on the earnings history for ULTA, volatility expectations aren't too through-the-roof. For instance, the options market is pricing in a one-day, post-earnings move of 9.5% for this time around, compared to an average post-earnings swing of 6.4% over the past two years. In this quarter last year, the shares jumped 6.4% after earnings. Ulta earnings come out after the close next Thursday, Aug. 29.


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