Options Bears Veer Toward AutoZone Ahead of Earnings

The auto parts retailer will report earnings ahead of the bell, tomorrow

Deputy Editor
Sep 21, 2020 at 12:30 PM
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Automotive retailer AutoZone, Inc. (NYSE:AZO) has been consolidating just beneath the $1,251 mark for the past couple weeks, with a brief breakout above this area notching AZO an annual high of $1,274.41. Today, the shares are heading for their fourth-consecutive loss, with the equity testing its footing just above the 80-day moving average. This drop comes one day ahead of the company's fiscal fourth-quarter earnings report, which comes out ahead the open tomorrow, Sept. 21. 

AZO Sept 21

AutoZone's upcoming earnings are sparking plenty of bearish action in the normally quiet options pits. So far, 1,591 puts have exchanged hands -- five times the intraday average -- compared to just 563 calls. The most popular is the weekly 9/25 1,150-strike put, followed by the 1,000-strike put, with positions being opened at the latter. This indicates these traders are expecting even more downside for AZO before these contracts expire this Friday, Sept. 25. 

This tendency toward puts has been the norm during the past couple weeks. In fact, at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AZO sports a 10-day put/call volume ratio of 1.41, which stands higher than 72% of readings from the past year.

A look at AutoZone's post-earnings history shows a mixed bag. During its last eight reports, AZO was higher the session following four times. The stock was unchanged after entering the earnings confessional this past May, and averages a two-year post-earnings return of 4.1%, regardless of direction. This time around, the options pits are pricing in a much bigger next-day swing for AZO at 8.8%. 



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