Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Nov 17, 2023 at 11:11 AM
  • Analyst Update
  • Buzz Stocks

Barclays downgraded GitLab Inc (NASDAQ:GTLB) stock to "equal weight" from "overweight" earlier, noting its short-term risk-reward ratio looks less appealing. In addition, the software name's Chief Financial Officer Brian G. Robins yesterday sold 10,000 shares of the company, totaling $454,900, per a U.S. Securities and Exchange Commission (SEC) filing.

GTLB was last seen down 3.6% to trade at $46.82, after facing rejection at the $50 region, which also capped its October rally. The 60-day moving average is providing a floor for this pullback, however, and is helping Gitlab stock maintain its impressive 83.4% lead for 2023.

Options traders have been overwhelmingly bullish of late. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day call/put volume ratio of 5.33 that stands higher than 90% of annual readings. This suggests calls have been getting picked up at a much quicker-than-usual clip.

Analysts were also optimistic coming into today, with 13 of the 18 in question sporting a "buy" or better rating, while the 12-month consensus target price of $60.13 sits at a 28.4% premium to current levels. Should any firms follow in Barclays' footsteps, GTLB could swing even lower.

Published on Nov 17, 2023 at 11:05 AM
  • Buzz Stocks

The shares of Tenet Healthcare Corp (NYSE:THC) are surging today, after news that the company is selling three of its South Carolina hospitals for about $2.4 billion. At last glance, THC was up 10.7% to trade at $64.38, earlier as high as $66.24.

This gap higher has THC breaking above its 320-day moving average, though its 200-day trendline still lingers just above as pressure. Since the start of the year, the equity is up over 30%. 

The stock's typically quiet options pits are seeing a bullish surge after the report. So far, 3,273 calls have been traded, which is five times the amount typically seen at this point. The November 60 call is the most popular contract, followed by the 67.50 call in that series. 

Analysts are firmly optimistic on THC, with 15 of the 16 in coverage carrying a "buy" or better rating, and just one a tepid "hold." Plus, the 12-month consensus price target of $80.56 is a 26.7% premium to current levels. 

 

Published on Nov 17, 2023 at 10:41 AM
  • Intraday Option Activity
  • Analyst Update
 
Published on Nov 17, 2023 at 10:15 AM
  • Editor's Pick
  • Bernie's Content

Subscribers to Chart of the Week received this commentary on Sunday, November 12.

The following is an excerpt from our latest episode of our Schaeffer’s Market Mashup podcast, featuring an insightful conversation with Cboe Global Markets’ Henry Schwartz. Henry unpacks everything you ever wanted to know about zero day to expiration options, or 0DTE, a strategy that is taking the industry by storm. To listen to the entire episode, access the media player at the bottom of this page.

 

Walk me through the options volume growth in the last few years.

Henry Schwartz: Before the COVID period, the option volume throughout most of the 2010’s to 2019 period was around 4 billion contracts a year, actually relatively flat. And then 2020 and 2021, things just exploded. We saw seven and a half billion contracts traded, and then nine billion, and then 10 billion. And then this year, we've got two more months to go and we're on pace for 11.2 billion contracts. Another record year for options. Something I'm pretty proud of is that the options growth has been a lot steadier than the growth in actual stock trading, which is much more cyclical and much more subjected to the whims of markets going up and markets going down. Even though the markets were down in 2022, we still had record option volume then. So you know, we continue to see interesting evolution of the market.

SPX Volume

Are 0DTE contracts the natural progression from the meme stock craze?

That’s partially true. There's certainly some people that made a fortune during the meme stock mania, whether they got lucky depends on how you want to frame it. But those same people, going into a sideways market or down market in 2022 and buying calls is not going to make you the money that made you in 2021. But many of those traders did the homework, figured out trades that made money in a sideways market, and started to understand vertical spreads as well as maintaining and adjusting trades. And that’s what we're seeing, some of those traders that had adapted to different market conditions are now adapting to new products, like the zero day contracts. And that's where we’re seeing the action now.

What are some of the ways a trader can utilize 0DTE options on the S&P 500 Index (SPX)?

Schwartz: If you're solidly long in the market up 1%. It may meet your goals to say, ‘you know what, I don't need any further upside today. But what I do want to do is sell some calls and take in some premium.’ And I'm very comfortable with that kind of risk reward, right? The risk is the market keeps going up. And maybe that fits you because you have a core long, and if the market goes back down, then you're going to have captured this premium.

And so the other things that we're seeing is a lot of complex order activity with some very heavy spread trading. Vertical spreads, calendar spreads, trades being adjusted and rolled, all because it's a hedging tool. So if you're a portfolio hedge, you're in unity to buy some puts to hedge for the rest of the year. As time passes, and the delta of the options changes or the expiration, you know, you're going to roll that trade to another strike, another contract, another expiration. So that's why you see so much spread activity, and typically for the S&P 500 Index (SPX), about 70% of the flow is complex orders like that, because it was such a systematic hedging product.

Say we opened up at $4,400. I'm going to sell the $4,420.30 call spread for $2. And maybe the $3,980.90, put spread for $2. We see a lot of that, but we also see trades where people put on a simultaneous four legged condor like that. And then they use very, very disciplined stop losses. Strategies that basically say: ‘Okay, well, if it does blow through one of my spreads, here's where I'm going to liquidate.’ They’re not just going to wear the thing out until it expires and see what happens. So if you basically kind of pick your risk profile, then you say, ‘okay, I want to do this every day at 9:42, and 9:56, and 10:14, and then manage that whole slew of trades over the course of the day.’ And they're happy with the performance. That doesn't mean it always makes money, but it means that they like the way these contracts behave.

Is there a put or call bias on these ODTE trades?

Schwartz: The ODTE is incredibly close to a one-to-one put/call ratio. That is evidence of the use case which involves basically whether people are buyers or sellers; they're doing it kind of symmetrically around the at-the-money. In that example I was talking about where we do see this kind of flow especially in the first couple hours of the day. With people selling a vertical put spread and selling vertical call spreads and very commonly doing both, that's going give you a put/call ratio of one; two puts and two calls. And then what we see over the course of the day customers managing it all by liquidating trades that that are blowing up on them -- because markets move, of course -- but also taking profits on trades that are going their way. But again, you're having these things trade in pairs a lot of the time.

Published on Nov 17, 2023 at 9:18 AM
  • Opening View

Futures on the Dow Jones Industrial Average (DJIA) are enjoying a solid triple-digit lead ahead of the bell this morning, while the S&P 500 Index (SPX) and Nasdaq-100 Index (NDX) hover around fair value. For the week, all three benchmarks are headed for a third-straight win. Meanwhile, this morning's U.S. housing starts data showed construction of new homes rose 1.9% in October. 

Continue reading for more on today's market, including: 

Futures Nov17

5 Things You Need to Know Today

  1. The Cboe Options Exchange (CBOE) saw over 1.3 million call contracts and 846,207 puts traded Thursday. The single-session equity put/call ratio rose to 0.64 and the 21-day moving average stayed at 0.69.
  2. Gap Inc (NYSE:GPS) is up 18.4% premarket, soaring after its upbeat third-quarter earnings report, brushing off a bleak holiday-quarter forecast. Plus, no fewer than nine analysts lifted their price targets. Should these gains hold, GPS will mark a fresh 52-week high. 
  3. Expedia Group Inc (NASDAQ:EXPE) is up 3% before the bell, after an upgrade from Evercore ISI to "outperform" from "in line," with a price-target hike to $200 from $135. Since the start of the year, EXPE is up 48.2%, and on track for a new 2023 peak. 
  4. Marriott Vacations Worldwide Corp (NYSE:VAC) is down 2.1% in electronic trading, after BofA Global Research downgraded the stock to "underperform" from "neutral." Since the start of the year, the equity is down 39.5%. 
  5. See what economic data is due out next week.  

buzznov17

Alibaba Stock Dragged the Hang Seng

Stocks in Asia closed the week mixed. Hong Kong’s Hang Seng paced the laggards, shedding 2.1% after Alibaba (BABA) lost roughly 10% on Friday. The South Korean Kospi, meanwhile, turned in a 0.7% loss. Rounding out the region, Japan’s Nikkei rose 0.5%, and China’s Shanghai Composite added 0.1%.

European markets are higher this afternoon, with financial services and basic resources stocks leading the charge. At last glance, London’s FTSE was up 0.7%, while France’s CAC 40 and Germany’s DAX were both 0.8% higher.

Published on Nov 16, 2023 at 4:30 PM
Updated on Nov 16, 2023 at 4:33 PM
  • Market Recap

The Dow snapped a four-day win streak on Thursday, as Walmart's (WMT) grim forecast weighed on the blue-chip index. A wider-than-expected drop in import prices for October contributed to today's pessimism, while lackluster manufacturing data did little to ease concerns. Meanwhile, both the Nasdaq and S&P 500 settled just above breakeven, despite struggles for energy and tech stocks.  

  • Walmart stock brushes off quarterly win.
  • How this retail stock won over call traders.
  • Plus, behind CSCO's plummet; Goodyear Tire stock upgraded; and oil stock pullback not a cause for concern.
 

Closing Index Summary November 162023

NYSE and Nasdaq Stat November 162023

5 Things to Know Today

  1. Boeing (BA) secured 295 aircraft orders in four days at the Dubai Airshow, amid strong demand for wide-body jets despite safety scandals in recent years. (CNBC)
  2. Williams-Sonoma (WSM) missed third-quarter revenue estimates and cut its full-year outlook, amid “ongoing consumer hesitancy" on furniture spend. (MarketWatch)
  3. Disappointing forecast weighs on Cisco stock.
  4. Why this firm sang Goodyear Tire stock's praises.
  5. Don't sweat Pioneer Natural Resources stock's pullback.

Earnings November 162023

Unusual Options Activity November 162023

Oil Prices Plummet Amid Demand Fears

Oil prices extended their decline on Thursday, closing at their lowest level since July as traders worried energy demand would slow down after today's batch of economic data. December-dated West Texas Intermediate (WTI) crude fell $3.76, or 4.9%, to close at $72.90 a barrel for the day.

Meanwhile, gold prices settled higher, as Wall Street continued to bet on the end of the Federal Reserve's interest rate campaign. December-dated gold rose $22.30, or 1.1%, to close at $1,986.60 an ounce for the day.

Published on Nov 16, 2023 at 3:17 PM
Updated on Nov 16, 2023 at 3:27 PM
  • Quantitative Analysis

Blue-chip pharmaceutical stock Walgreens Boots Alliance (NASDAQ:WBA) is underperforming on the charts, recently hitting a Nov. 13 record low of $20.00. However, it may worth waiting to buy in the dip.

Though the stock bounced off its aforementioned lows, the $22 level, which kept a ceiling on gains for the last month, already rejected the short-lived rally. Today, Walgreens stock is down 4.1% at $20.67 at last glance, amid news that the company will close its stores for the Thanksgiving holiday. Plus, the shares are now within striking distance of two historically bearish trendlines. 

More specifically, WBA is within one standard deviation of its 50- and 60-day moving averages, both of which were bearish for the stock in the past. The stock brushed its 60-day trendline six times in the past three years, after which it was lower one month later 100% of the time, averaging a 7.4% loss. It's 50-day moving average saw seven similar signals, after which WBA was lower one month later 86% of the time, averaging a 3.7% loss. 

WBA Nov16

An unwinding of optimism in the options pits could provide headwinds as well. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Walgreens stock's 10-day call/put volume ratio of 5.17 ranks higher than 82% of readings from the past year, indicating a strong penchant for calls of late. 

Published on Nov 16, 2023 at 1:00 PM
  • The Week Ahead
          
Published on Nov 16, 2023 at 12:40 PM
Updated on Nov 16, 2023 at 12:47 PM
  • Intraday Option Activity
  • Buzz Stocks
 
Published on Nov 16, 2023 at 12:46 PM
  • Quantitative Analysis

Pioneer Natural Resources Co (NYSE:PXD) stock is down 1.9% at $230.63 at last glance, and in danger of of falling below its year-to-date breakeven mark. While PXD is also down 3.5% this month, traders shouldn't fret just yet, as a recent pullback placed it near a trendline with historically bullish implications.

More specifically, Pioneer Natural Resources stock is trading just one standard deviation away from its 100-day moving average. According to our Schaeffer's Senior Quantitative Analyst Rocky White, PXD saw five similar signals in the last three years, settling higher one month later 80% of the time, with an average 11.3% gain. A similar move would put the stock above $256.50, just below its Oct. 19 peak of $257.76 for 2023.

PXD Chart November 162023

Attractively priced premiums make now an excellent time to gamble on PXD's move higher. In fact, the security's Schaeffer's Volatility Index (SVI) of 23% ranks in the 19th percentile of its annual range, suggesting options traders are now pricing in lower-than-usual volatility expectations. 

Published on Nov 16, 2023 at 12:06 PM
  • Midday Market Check

 

 

Published on Nov 16, 2023 at 11:31 AM
  • Intraday Option Activity
  • Buzz Stocks

Despite beating earnings and revenue expectations for the third quarter, Walmart Inc's (NYSE:WMT) full-year forecast came in below analysts' estimates, as company officials expressed concern over the holiday quarter. According to the retailer, purchases slowed toward the end of October, as shoppers "leaned heavily" on promotions. At last check, WMT is down 6.4% at $158.88.

Today's bear gap has the security tumbling from yesterday's record high of $169.94. Now on track for its worst single-day percentage drop since July 2022, the stock is also slipping below support from its 140-day moving average, which contained an October pullback. WMT is still up 10.7% in 2023, however.

Over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day put/call volume ratio of 1.13 that stands higher than 94% of annual readings. This means options traders have been much more bearish than usual.

Drilling down to today's options activity, 98,000 calls and 88,000 puts have already crossed the tape, or 12 times the intraday average amount. Most popular is the November 157.50 put, followed by the 160 put in that same series, with new positions being opened at both.

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