Options Bulls Target Walgreens Ahead of Earnings

WBA call buying has spiked recently

by Patrick Martin

Published on Jan 7, 2020 at 12:22 PM
Updated on Jun 24, 2020 at 10:16 AM

Earnings season is just around the corner, and the first Dow name up is Walgreens Boots Alliance Inc (NASDAQ:WBA), with the pharmacy name set for its first-quarter report before the open tomorrow, Jan. 8. Ahead of the event, options traders are taking a greater interest in the blue chip.

Diving right in, nearly 4,000 calls have changed hands today, three times the average intraday amount and more than five times the number of puts traded. Leading the charge is the weekly 1/10 60-strike call, and there are also new positions being opened at the weekly 1/31 62-strike call. Traders targeting those calls clearly expect a boost from WBA in the coming weeks.

The appetite for calls is nothing new, based on the equity's 10-day call/put volume ratio of 3.99 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Plus, this reading ranks in the 93rd annual percentile, so the level of call buying versus put buying is quite rare.

On the charts, Walgreens stock was last seen trading at $59.25, consolidating below the $60 level for the past month. The shares have tacked on 21% since a late August bottom at $49, but remain down 15% year-over-year. 

Daily Stock Chart WBA

And finally, we get to the company's earnings history. The stock has finished lower the day after earnings in five of the last eight quarters, although its two most recent post-earnings reactions ended in positive territory. In the last eight quarters, the blue chip has moved an average of 5.3% regardless of direction. This time around, the options market is pricing in a larger-than-usual post-earnings swing of 6.3%.


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