Bulls Double Down on Apparel Stock Before Earnings

Gap Inc (NYSE:GPS) will join the slew of retailers reporting earnings this week when it steps into the confessional after tomorrow's close to share second-quarter results. The security is up 0.3% to trade at $9.61 at last check, still relying on support from its 80-day moving average after falling short of the $11 region. So far in 2023, GPS is down more than 18%.

It could go either way for the apparel stock, which has a mixed history of post-earnings reactions. GPS finished four of its last eight next-day sessions higher, including a 12.4% pop in May. Shares averaged a move of 7.1% during the past two years, regardless of direction, but this time the options pits are pricing in a much bigger-than-usual move of 20.1%.

At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day call/put volume ratio of 5.10 ranks higher than 99% of readings from the past year. This suggests calls have been much more popular than usual.

Options volume is running at triple the intraday average, with 16,000 calls and 7,823 puts traded so far today. Most popular by far is the weekly 8/25 9.50-strike call, with positions being opened here.

It's worth noting that the 34.98 million shares sold short make up 17.2% of Gap stock's available float. Plus, analysts lean bearish, with 11 of the 13 in coverage calling GPS a "hold" or worse.