Options Traders Target Cybersecurity Stock Before Earnings

The stock is inching lower ahead of the event

Digital Content Manager
Aug 22, 2022 at 12:27 PM
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The shares of Palo Alto Networks Inc (NASDAQ:PANW) are inching lower today, last seen down 0.5% to trade at $511.05, just ahead of the tech name's fiscal fourth-quarter earnings report, due out after the close. PANW is attempting to find its footing near the 80-day moving average, though the 100-day moving average looms just above as a potential ceiling on the charts. The equity has added 39.5% in the past 12 months, though it's suffering a 7.9% year-to-date deficit. 

panw chart aug 22

The stock scored a bull note earlier this month, and most members of the brokerage bunch are incredibly optimistic on the equity. Of the 26 in coverage, 25 call it a "buy" or better. What's more, the 12-month consensus price target of $631.23 is a 23% premium to current levels. 

Short sellers have been hitting the exits, off 4.2% in the last reporting period, though there's still room for some of this short interest to unwind. The 6.95 million shares sold short account for 7.1% of the stock's available float, and would take almost one week to cover, at PANW's average daily pace of trading. 

Options traders have also taken a bullish stance, given short-term traders have rarely been more call-biased. This is per PANW's Schaeffer's put/call open interest ratio (SOIR) of 0.95, which sits higher than just 2% of readings from the past year.

Today's options activity leans bearish, though. So far, 13,000 puts have been traded, which is five times the intraday average, compare to 11,000 calls. The most popular positions are the September 550 call and 400 put, with positions being opened at the former. 

Speaking of options players, they are pricing in a 12.3% post-earnings move for PANW, regardless of direction, which is much larger than the 6% swing shares averaged during their last eight earnings reports. The equity has usually done after those events, settling higher in six of these eight next-day instances. This includes an impressive 18.6% next-day surge in August 2021.


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