Auto Parts Stock Hits Record High Ahead of Earnings

Options volume is running at 11 times the intraday average

Deputy Editor
Nov 15, 2021 at 2:28 PM
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The shares of Advance Auto Parts, Inc. (NYSE:AAP) are gaining steam ahead of the company's third-quarter earnings report, which is due out before the open tomorrow. The security was last seen up 1.5% to trade at $242.48, after earlier surging to a new record high of $242.98. Advance Auto Parts stock has turned in eight positive weeks out of the last 10, culminating in its 54% year-to-date lead, with just over one month left in 2021. 

AAP Chart Nov 15

There is reason to believe AAP could get a boost from earnings, as the equity tends to do well following the event. In fact, over the last eight quarters, the stock finished four of eight next-day sessions higher, including a 6.2% pop in February 2020. Over the last two years, AAP averaged a 2.8% swing after earnings, regardless of direction. This time, the options market is pricing in a much larger 8.5% move.

Options traders are already building their positions. So far today, 5,398 puts and 4,981 calls have exchanged hands, or 11 times the intraday average. The two most popular contracts are the November 220 and 230 puts, indicating these traders expect some downside for the security by Friday's close.

The options pits have been bearish of late. Over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.86 sits higher than 82% of readings from the last year. In simpler terms, puts have been getting picked up at a much-faster-than usual pace.

The brokerage bunch is bullish towards AAP, on the other hand. Of the 13 in coverage, eight call is a "buy" or better against five that recommend a tepid "hold." Meanwhile, the 12-month consensus price target of $240.65 is only a slim discount to the stock's current perch.


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