Dropbox Calls Pop as Earnings Loom

May 24 calls are incredibly popular lately

Managing Editor
May 7, 2020 at 12:39 PM
facebook twitter linkedin


Even as the week winds down, there are still plenty of interesting names ready to step into the earnings confessional. One intriguing company is Dropbox Inc (NASDAQ:DBX), with the file sharing and storage concern set to report first-quarter earnings after the close tonight. Ahead of the event, DBX options traders are coming out in droves.

By noon, 29,000 Dropbox calls have already changed hands, 21 times the average intraday amount and 15 times the number of puts traded. Leading the charge is the May 23 call, with the 24 call in the same series close behind. New positions are being opened at the former, so buyers of this contract are expecting a post-earnings pop from DBX to carry over into May 15, when the options expire.

Looking back at the past two years, the stock has a choppy history following quarterly reports. Of the eight previous reports, five have been negative, including a 12.8% swing lower in August. Back in February though, Dropbox stock soared by 20% post-earnings. The security averaged a 7.9% swing, regardless of direction, the day after its last eight reports, and this time around the options pits are pricing in a much larger 17.6% shift. 

This penchant for calls is nothing new though. In the past 10 days, 8,616 calls have exchanged hands compared to 2,685 puts. Digging deeper, the May 20 call is home to peak open interest by a wide margin, and the aforementioned May 24 call is home to the largest increase in open interest during this time frame.

Dropbox stock --which is up 5% today to trade at $21.38 -- boasts a stable 19% lead in 2020, with recent pullbacks contained by the ascending 20-day moving average. It's no surprise then that there's optimism among the brokerage bunch, with seven of nine rating DBX a "buy" or better. And short interest appears to have dried up as well -- down 26% in the two most recent reporting period -- and accounting for a slight 4.7% of the equity's total available float.

Daily Stock Chart DBX


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners