Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Dec 18, 2014 at 7:58 AM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Among the stocks attracting attention from options traders lately are athletic apparel giant Nike Inc (NYSE:NKE), networking specialist QUALCOMM, Inc. (NASDAQ:QCOM), and mobile phone maker Nokia Corporation (ADR) (NYSE:NOK). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on NKE, QCOM, and NOK.

  • NKE has performed well in 2014, gaining roughly 20% year-to-date to perch comfortably at $94.50. Surprisingly, sentiment in the options pits is slightly more bearish than usual. Nike Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.51 ranks higher than 57% of all other readings in the past year. However, NKE's 30-day at-the-money implied volatility hit a new high yesterday at 28.8% before settling at 27.8%, showing high demand -- and, thus, elevated prices -- for short-term options ahead of tonight's earnings report.

  • QCOM has tumbled 12.4% since peaking near $82 in mid-July, and despite yesterday's 2.7% gain, the stock has shed 2.7% of its value year-to-date to sit at $72.21. Accordingly, sentiment among options traders is growing increasingly bearish, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.87 ranks higher than 90% of readings in the past year. The equity's short-term options are currently more expensive than usual, as its Schaeffer's Volatility Index (SVI) of 25% ranks in the 73rd percentile of its yearly range. Meanwhile, analysts covering QUALCOMM, Inc. are overwhelmingly bullish, with 18 out of 23 giving the equity a "buy" or better rating, with not a single "sell" in sight. If the stock continues to fall, it may see a round of analyst downgrades, which could push the shares even lower.

  • Shares of NOK have underperformed lately, losing 3.1% year-to-date, despite gaining 1.7% yesterday to rest at $7.86. Correspondingly, traders in the options pits are slowly shifting from bullish to bearish on the stock. Nokia Corporation's (ADR) 50-day ISE/CBOE/PHLX put/call volume ratio of 0.29 is in the 75th percentile of its annual range, meaning puts have been bought to open over calls at a faster pace only 25% of the time in the last year. Per the equity's SVI of 38% -- which is in the 43rd annual percentile -- short-term options prices are relatively muted. However, the stock's Schaeffer's Volatility Scorecard (SVS) of 22 indicates the shares have tended to make undersized moves over the past year, relative to what the options market has priced in.
Published on Dec 17, 2014 at 2:35 PM
Updated on Mar 19, 2021 at 7:15 AM
  • General

It's been a wild ride for Herbalife Ltd. (NYSE:HLF) today. After dropping 5% to a new annual low of $35.45, the shares have bounced back in spite of activist investor Bill Ackman's latest bearish presentation, in which he predicted the "pyramid scheme" will implode under the scrutiny of regulators. At last check, HLF has muscled 1.3% higher to $37.86, though bearish bets are gaining traction in the options pits.

Roughly 12,000 HLF puts have traded so far today -- about four times the number of calls exchanged, and representing a 30% mark-up to the stock's average intraday put volume. It looks like speculators are buying to open the deep in-the-money January 2016 70-strike put -- most active on the day -- while short-term bears are circling the December 35 put, which will move into the money if HLF retreats below $35 (and deeper into new-low territory) by Friday's close, when front-month options expire.

Today's affinity for pessimistic positions is par for the course for HLF. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 3.72 stands higher than 94% of all other readings from the past year. In other words, option buyers have picked up HLF puts over calls by a wider-than-usual margin during the past two weeks.

Daily Chart of HLF since January 2014

Technically speaking, Herbalife Ltd. (NYSE:HLF) has surrendered more than half its value in 2014, and has underperformed the broader S&P 500 Index (SPX) by more than 30 percentage points in the past two months. As such, it's no surprise that Ackman isn't the only one shorting HLF; short interest accounts for 38.2% of the equity's total available float, representing more than 12 sessions' worth of pent-up buying demand, at HLF's average daily trading volume.

Published on Dec 17, 2014 at 2:34 PM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Chevron Corporation (NYSE:CVX) found a firm foothold atop the century mark this week, home to peak put open interest in the December series. Today -- thanks to a sector-wider rally in energy names -- the shares are up 3.6% at $105.36, making CVX the biggest gainer on the Dow. This strong bounce has done little to satiate options traders, though, who are scooping up calls at two times the intraday average.

Daily Chart of CVX Since November 2014

Most active by a mile is the stock's January 2015 110-strike call, where 11,216 contracts have been exchanged. It appears a number of positions have been bought to open -- a theory echoed by data from the International Securities Exchange (ISE) -- as traders bet on an extended run higher through January options expiration.

From a wider sentiment perspective, today's accelerated call activity marks a change of pace in CVX's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.98 ranks in the bearishly skewed 80th annual percentile. Should Chevron Corporation (NYSE:CVX) extend its rebound from support at the round-number $100 mark, a continued shift in sentiment among options traders could help fuel the security's fire.

Published on Dec 17, 2014 at 1:18 PM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Rite Aid Corporation (NYSE:RAD) is scheduled to unveil its fiscal third-quarter earnings report bright and early tomorrow morning. Over the past four quarters, the stock has averaged a single-session post-earnings loss of 6% -- including an 18.5% plunge in September. In spite of this, calls are trading at four times the average intraday rate today, with a number of option bulls betting on RAD to buck this historical trend.

Most active in RAD's options pits is the December 6 call, where 4,086 contracts have changed hands. Drilling down, it appears a number of these positions are being bought to open, as traders roll the dice on the stock to be perched above $6 at week's end, when the front-month options expire.

On the charts, Rite Aid Corporation (NYSE:RAD) -- unlike sector peer CVS Health Corp (NYSE:CVS) -- has struggled since hitting a 12-year high of $8.61 in early June, with the shares off more than 30% to trade at $5.99. What's more, the $6 level, which coincides with RAD's 320-day moving average, as well as peak call open interest in the December series, has put a quick halt to today's rally attempt.

Daily Chart of RAD Since June 2014 With 320-Day Moving Average
Published on Dec 17, 2014 at 10:23 AM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Things have been pretty gloomy for First Solar, Inc. (NASDAQ:FSLR), which has lost nearly a quarter of its value this year to perch at $41.19. Yesterday, in fact, the shares dropped 1.8% and touched an annual low of $40.78, despite Morgan Stanley giving the company a 50% chance of launching a yield co, while maintaining an "equal weight" rating and issuing a new $47 price target. This flurry of developments brought options traders to the table, too, as contracts crossed at nearly triple the expected daily clip.

One of Tuesday's more interesting transactions involved the simultaneous initiation of a 2,000-contract long position at the January 2015 45-strike put and identically sized short position at the January 2015 45-strike call. In other words, this speculator implemented a synthetic short to gamble on additional downside in FSLR over the next five weeks.

A high degree of pessimism is detected throughout the options pits. During the last 10 days, FSLR puts have been bought to open at a faster rate than calls, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The resultant put/call volume ratio of 1.37 rests just 2 percentage points from an annual bearish extreme.

This morning, though, while First Solar, Inc. (NASDAQ:FSLR) earlier stumbled to a fresh low of $40.54, the shares were last seen up 0.7%. Helping the stock -- and the solar sector, more generally -- is news that the U.S. Commerce Department will impose a stiff tariff on solar equipment imported from China and Taiwan.

Daily Chart of FSLR Since January 2014

Published on Dec 17, 2014 at 10:22 AM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Carnival Corporation (NYSE:CCL) will take its turn in the earnings spotlight ahead of Friday's open, and option traders have been banking on a negative reaction to the company's quarterly report. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, CCL's 10-day put/call volume ratio of 1.09 ranks in the 72nd annual percentile. Simply stated, puts have been bought to open over calls at a faster-than-usual clip in recent weeks.

It was a trend witnessed yesterday, with puts crossing the tape at 3.6 times the average daily rate -- and outpacing calls by a nearly 2-to-1 margin. Buy-to-open activity was detected at CCL's December 43 put, where 4,104 contracts were traded. By initiating these long puts, speculators expect the stock to be sitting south of the strike at week's end, when front-month options expire.

Tuesday's options bears were dealt a blow today, though, with the stock up 2.6% at $44.26, following a price-target hike to $50 from $46 -- and a reiterated "positive" rating -- at Susquehanna, and a new "buy" recommendation and $60 price target from Buckingham. This positive price action only echoes the equity's recent trajectory, with Carnival Corporation (NYSE:CCL) rallying 34% from its mid-October annual low of $33.11, thanks to a lift from its 20-day moving average. Should the shares fail to finish the week below $43, though, the most yesterday's put buyers stand to lose is the initial premium paid.

Published on Dec 17, 2014 at 8:19 AM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Among the stocks attracting attention from options traders lately are oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK), professional networking platform LinkedIn Corp (NYSE:LNKD), and internet gaming guru Zynga Inc (NASDAQ:ZNGA). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on CHK, LNKD, and ZNGA.

  • CHK has had a less-than-stellar year, shedding nearly 20% year-to-date, despite a 1.3% gain yesterday to close at $17.45. Unsurprisingly, sentiment in the equity's options pits is decidedly bearish. Chesapeake Energy Corporation's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.11 is at an annual peak, pointing to a healthier-than-usual appetite for long puts over calls of late. The stock's short-term options are currently expensive, on a volatility basis, per its Schaeffer's Volatility Index (SVI) of 68%, which ranks in the 84th percentile of its 52-week range.

  • Shares of LNKD have added roughly 58% since their early May bottom near $140, ushered higher atop their 10-week and 20-week moving averages. Even with this recent growth, the stock dropped 1.1% yesterday amid broad-market headwinds to sit at $215.57. Options traders remain bearish on LinkedIn Corp, with its 10-day ISE/CBOE/PHLX put/call volume ratio of 1.06 ranking higher than 85% of all similar readings taken in the past year. From a contrarian perspective, an unwinding of pessimism in the options pits could translate into more upside for LNKD. Per the equity's SVI of 36% -- which is in the 22nd annual percentile -- LNKD's near-term options are fairly cheap, from a volatility standpoint. Furthermore, the stock's Schaeffer's Volatility Scorecard (SVS) of 87 indicates the shares have tended to make outsized moves over the past year, relative to what the options market has priced in.

  • ZNGA has taken a dive this year, shedding nearly 38% of its value. Continuing this trend, yesterday the stock lost 3.1% to close at $2.36. Despite this extended slide, speculators have remained staunchly bullish. Per the equity's 50-day ISE/CBOE/PHLX call/put volume ratio, 8.51 calls have been bought to open for every put. Additionally, this ratio is in the 83rd percentile of its annual range, showing a bigger-than-usual preference for bullish bets over bearish. Zynga Inc's short-term options can be had at a relative bargain, on a volatility basis, as its SVI of 62% ranks in the 27th percentile of its annual range.
Published on Dec 16, 2014 at 2:34 PM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Integrated Device Technology Inc (NASDAQ:IDTI) rallied to $20.15 earlier -- its loftiest perch since January 2004 -- but was last seen lingering near $19.69. Option traders, however, are betting on the stock to rally back above this round-number mark over the next five weeks, by buying to open the January 2015 20-strike call, which is easily IDTI's most active option.

Should the stock fail to topple the strike by January options expiration, the most the speculators stand to lose is the initial premium paid. However, it appears these traders are willing to pay up for their bullish bets. Specifically, implied volatility on the January 2015 20-strike call is inflated relative to the security's 30-day historical volatility (56.7% vs. 36.1%), meaning premium is relatively expensive at the moment.

Technically speaking, the stock has been a standout in 2014, and has nearly doubled in value. More recently, Integrated Device Technology Inc (NASDAQ:IDTI) has put in a stellar performance against the S&P 500 Index (SPX), outpacing the broad-market barometer by nearly 38 percentage points over the past two months.

Daily Chart of IDTI Since January 2014
Published on Dec 16, 2014 at 2:03 PM
Updated on Mar 19, 2021 at 7:15 AM
  • General

After earlier touching an annual low of $86.19, Exxon Mobil Corporation (NYSE:XOM) was last seen 0.4% above breakeven at $87.24. This wild price movement -- which is reflective of today's broad-market volatility -- has brought a number of options traders to the table. In fact, calls are being exchanged at double the usual intraday rate, and the stock's 30-day at-the-money implied volatility has risen 2.5% to 29.2%, suggesting short-term strikes are in demand.

Taking the top spot is XOM's January 2015 92.50-strike call, where 18,339 contracts -- including a sweep of 15,000 -- have changed hands. Based on a number of factors, it appears traders are placing fresh bullish bets, anticipating the shares will rally past $92.50 by January options expiration.

This preference for call buying is a break from the recent norm, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the last 10 days, traders have bought to open nearly two XOM puts for every call, resulting in a put/call volume ratio of 1.63 -- in the 86th percentile of its annual range.

This prevailing skepticism isn't surprising, given Exxon Mobil Corporation's (NYSE:XOM) longer-term struggles. Year-to-date, the equity has shed about 14% of its value.

Published on Dec 16, 2014 at 12:49 PM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Twitter Inc (NYSE:TWTR) is down 1.6%, following a price-target cut to $45 from $55 at Evercore ISI -- although the brokerage firm maintained its "buy" rating. Nevertheless, calls are outpacing puts by a nearly 2-to-1 margin. Meanwhile, the stock's 30-day at-the-money implied volatility is up 1.5% at 49.7%, signaling elevated demand for short-term options.

Seeing the most action in TWTR's options pits today are the December 36 and weekly 12/26 41.50-strike calls. It appears the majority of the 12,887 contracts traded across these two strikes have been bought to open, as traders roll the dice on a quick bounce over the next two weeks.

From a wider sentiment perspective, today's call-skewed session just echoes the withstanding trend. Specifically, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.44 ranks in the 88th annual percentile. Additionally, TWTR's Schaeffer's put/call open interest ratio (SOIR) of 0.60 rests below 75% of similar readings taken in the past year.

Technically speaking, however, Twitter Inc (NYSE:TWTR) has been on a steady downtrend since hitting its most recent high of $55.99 in early October, with the shares off 35.2% to trade at $36.27. Should the shares continue to struggle, a capitulation from option bulls could translate into a fresh wave of selling pressure.

Published on Dec 16, 2014 at 11:26 AM
Updated on Mar 19, 2021 at 7:15 AM
  • General

Yandex NV (NASDAQ:YNDX) is getting pummeled around midday, down 9.5% at $16 as worries intensify over the continued slide in the Russian ruble. In fact, shares of the Internet search provider touched a record low of $15.02 earlier, landing the stock on the short-sale restricted list for a second straight day. Meanwhile, put volume is surging as traders search for alternative ways to bet bearishly on the equity.

Digging deeper, YNDX puts are crossing at 11 times the expected intraday pace, and the security's 30-day at-the-money implied volatility has charged 24.1% higher to 79% -- a new annual high. The most active option is the December 15 put, which traders are buying to open in the hopes of extended losses through the end of the week, when front-month contracts expire.

This propensity for put buying, relative to call buying, is business as usual for Yandex NV (NASDAQ:YNDX). The stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.44 ranks near the top quartile of its annual range, suggesting speculators have had a stronger-than-usual appetite lately for bearish bets over bullish.

Published on Dec 16, 2014 at 10:34 AM
Updated on Mar 19, 2021 at 7:15 AM
  • General

It was a terrible start to the week for Linn Energy LLC (NASDAQ:LINE), which shed 18.2% on Monday, after MLV & Co. reiterated a tepid "hold" rating on the shares, explaining "LINE's distribution policy appears threatened if current commodity prices persist for a significant period." Against this backdrop, the stock was sent to the short-sale restricted list, and put volume soared to three times what's typically seen, as traders looked for alternate ways to bet bearishly on the equity.

Drilling down, LINE's December and January 2015 10-strike puts saw the most action, with 9,864 contracts collectively traded here. All signs point to buy-to-open activity, as traders rolled the dice on an extended stay in single-digit territory.

In today's session, the shares fell to a record low of $9.17 out of the gate -- but were last seen 10.7% higher at $10.88, as the company's fresh influx of cash overshadows another round of dreary analyst attention. Specifically, Baird cut its rating on the stock to "neutral" from "outperform," and slashed its price target to $10 from $21, while Raymond James dropped its target price by $15 to $18.

Given yesterday's sharp sell-off, though, LINE's 14-day Relative Strength Index (RSI) is resting at 16 -- deep in oversold territory -- suggesting a near-term bounce may have been in the cards. Should the stock resume its downtrend, though, more bearish brokerage notes could be on the horizon. At present, five out of eight covering analysts maintain a "buy" or better rating toward Linn Energy LLC (NASDAQ:LINE), versus three "holds" and not a single "sell."

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