Calls Pop Ahead of AOBC Earnings

American Outdoor Brands has seen some pretty wide post-earnings swings in the past

Digital Content Manager
Dec 5, 2019 at 11:24 AM
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The shares of American Outdoor Brands Corp (NASDAQ:AOBC) are popping ahead of the firm's second-quarter earnings report due out after the close tonight. AOBC is up 3.2% to trade at $9.32, so far. Looking back, the security has been in rally mode since bottoming out at an eight-year low of $5.41 in early October, guided higher by its ascending 20-day moving average, and on Monday conquered its 200-day moving average for the first time since March. The equity's rebound has a ways to go however, with AOBC still down 28% for the year.

AOBC Chart Dec 5

The options pits are picking up ahead of tomorrow's report, too. So far 1,037 calls have crossed the tape -- three times the intraday average. A large number of these trades are centered around the weekly 12/13 11-strike call, where contracts are being sold-to-open. On the other hand, buy-to-open activity is taking place at this series at the 10-strike call, meaning these traders hoping AOBC gets a post-earnings rally by the time these contracts expire on Dec. 13. 

Looking back, American Outdoor Brands stock has seen some pretty serious swings in the sessions following it's last eight quarterly reports, including a 21.7% next-day drop during its last August quarterly confessional, and a massive 43.6% surge in the session following its August 2018 report. The security has averaged a 14.1% move, regardless of direction, during these past two years, slightly lower than the 15.8% swing the options pits are pricing in this time around. 

While coverage on AOBC is relatively scant, of the three analysts who do cover the stock, two give it a "strong buy" rating. What's more, the consensus 12-month target price of $11.67 holds a 25.4% premium to current levels, and hasn't been touched in over nine months. 

It's more of the same over in the options pits, where AOBC sports a 50-day call/put volume ratio of 5.93 on the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 73rd percentile of its annual range, too, suggesting a healthier-than-usual appetite for these bullish bets of late. 

On the other hand, short sellers have also been piling on ahead of tomorrow's earnings event. In the last reporting period, short interest rose 19.9% to 3.10 million shares sold short -- a solid 7.1% of the stock's available float, or three days at the security's average pace of trading. It's possible some of that call buying could be shorts seeking an options hedge against any post-earnings upside.

 

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