Bulls Target Spotify Stock Before Earnings

Call volume is running double to what's typically seen at this point

Deputy Editor
Oct 26, 2021 at 1:20 PM
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Music streaming stock Spotify Technology SA (NYSE:SPOT) is clinging close to its breakeven during today's session, last seen up less than 0.1% at $258.07, as investors await the company's third-quarter earnings results, which are due out before the open tomorrow. Analysts are expecting a loss of 19 cents per share for the quarter, and a rise in revenue from last year. 

While the security isn't seeing much movement today, Spotify stock's options pits are bursting with activity. So far, 6,083 calls have exchanged hands, which is double the intraday average and nearly two times the number of puts traded. The most popular contract is the weekly 10/29 300-strike call, followed by the 280-strike call in the same series, with positions being opened at both. This implies these traders are expecting more upside for the underlying stock following Spotify's quarterly report. 

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SPOT's 50-day call/put volume ratio of 1.98 sits in the 95th percentile of its annual range. This suggests long calls have rarely been more popular this year. 

The security does appear to be on the up-and-up, adding 14.5% in October so far, with strong guidance from its 10-day moving average. Should this afternoon's muted gains hold, SPOT could log its highest close since mid-July. SPOT still sports an 18% year-to-date deficit however, and could run into pressure at its 320-day moving average, which rejected a rally attempt in September. 

spot stock  oct 26

Spotify stock has made some outsized post-earnings moves, including a 12.3% drop in April, and a 16.2% rise all the way back in October 2019. Overall, the security tends to fall the day after earnings, logging negative returns during six of its last eight sessions. Regardless of direction, SPOT has averaged a next-day swing of 8%, which is slightly lower than the 10.1% move options traders are pricing in. 

 

 

 

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