Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Jul 24, 2015 at 11:00 AM
Updated on Mar 19, 2021 at 7:15 AM
  • The Week Ahead
Following a generally disappointing week of earnings reports, bulls are likely crossing their fingers for a better showing next week. The docket will again be busy, with a number of blue chips preparing to tell all, including DuPont (NYSE:DD), Exxon Mobil Corporation (NYSE:XOM), Merck & Co., Inc. (NYSE:MRK), Pfizer Inc. (NYSE:PFE), and Procter & Gamble Co (NYSE:PG). Many will also be keeping one eye trained on social media stocks, with Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD), and Twitter Inc (NYSE:TWTR) all scheduled to report.

Outside of earnings, the Fed's two-day policy-setting meeting looms large, and by Wednesday afternoon, Wall Street may have a clearer picture of the central bank's rate-hike plans. The advance reading on second-quarter gross domestic product (GDP) is another major highlight, as well as Microsoft Corporation's (NASDAQ:MSFT) highly anticipated Windows 10 debut.

Below is a brief list of some key market events scheduled for the upcoming week. All earnings dates listed below are tentative and subject to change. Please check with each company's respective website for official reporting dates.

Monday, July 27

The week kicks off with durable goods orders and the Dallas Fed manufacturing survey.

Stepping up to the earnings plate are Baidu (BIDU), Hartford Financial (HIG), Norfolk Southern (NSC), Rent-A-Center (RCII), and Sohu.com (SOHU).

Tuesday, July 28

The Federal Open Market Committee's (FOMC) two-day policy-setting meeting kicks off. In addition, the S&P/Case-Shiller home price index and the Conference Board's consumer confidence survey are due.

The earnings calendar is full, featuring DuPont (DD), Merck (MRK), Pfizer (PFE), Ford Motor (F), Twitter (TWTR), Sirius XM (SIRI), SunPower (SPWR), Gilead Sciences (GILD), Aflac (AFL), Akamai Technologies (AKAM), AK Steel (AKS), Anadark Petroleum (APC), BP plc (BP), Buffalo Wild Wings (BWLD), Citrix Systems (CTXS), Corning (GLW), Cummins (CMI), D.R. Horton (DHI), Edwards Lifesciences (EW), GrubHub (GRUB), JetBlue Airways (JBLU), LyondellBasell (LYB), National Oilwell Varco (NOV), Panera Bread (PNRA), Peabody Energy (BTU), Reynolds American (RAI),  U.S. Steel (X), Wyndham Worldwide (WYN), and Yelp (YELP).

Wednesday, July 29

Set for release are the pending home sales index and weekly crude inventories. The Fed will also announce its latest policy decision.  In addition, Microsoft Corporation (MSFT) will launch its Windows 10 operating system.

Facebook (FB)
, MasterCard (MA), Cliffs Natural Resources (CLF), Anthem (ANTM), Apollo Global (APO), Booz Allen Hamilton (BAH),  General Dynamics (GD), Goodyear Tire (GT), Hilton Worldwide (HLT), Humana (HUM), Huntsman (HUN), Kinross Gold (KGC), Level 3 Communications (LVLT), Lifelock (LOCK), Marriott International (MAR), Noble (NE), O'Reilly Automotive (ORLY), Shutterfly (SFLY), Skechers (SKX), SolarCity (SCTY), Tableau Software (DATA), Vertex Pharmaceuticals (VRTX), Western Digital (WDC), and Whole Foods (WFM) will report earnings.

Thursday, July 30

The advance reading on second-quarter GDP will be in focus, as will weekly jobless claims.

Heading to the earnings confessional are Procter & Gamble (PG), LinkedIn (LNKD), FireEye (FEYE)Alcatel Lucent (ALU), Amgen (AMGN), AstraZeneca (AZN), Avon Products (AVP), Colgate-Palmolive (CL), ConocoPhillips (COP), Crocs (CROX), Delphi Automotive (DLPH), Deckers Outdoor (DECK), Eldorado Gold (EGO), Electronic Arts (EA), Fiat Chrysler (FCAU), Goldcorp (GG), Marathon Petroleum (MPC), Mondelez International (MDLZ), Monster Worldwide (MWW), Outerwall (OUTR), Pitney Bowes (PBI), Sealed Air (SEE), Sony (SNE), Stanley Black & Decker (SWK), Starwood Hotels (HOT), Steven Madden (SHOO), Teva Pharmaceutical Industries (TEVA), T-Mobile US (TMUS), Valero Energy (VLO), Virgin America (VA), VIVUS (VVUS), World Wrestling Entertainment (WWE), Yamana Gold (AUY), and Yandex NV (YNDX).

Friday, July 31

The week closes out with the employment cost index (ECI), the Chicago purchasing managers index (PMI), and the Thomson Reuters/University of Michigan consumer sentiment index.

Exxon Mobil (XOM), Immunogen (IMGN), Phillips 66 (PSX), Royal Caribbean (RCL), Seagate Technology (STX), and Tyco International (TYC) will finish the lineup of earnings reports.
Published on Jul 24, 2015 at 11:12 AM
Updated on Mar 19, 2021 at 7:15 AM
  • By the Numbers
A couple months ago, Schaeffer's Senior Quantitative Analyst Rocky White examined a handful of technical indicators to determine which ones work best. His conclusion, based on the numbers, was that the 200-day moving average and the 14-day Relative Strength Indicator (RSI) have been the most predictive of future price action.

In that vein, we decided to take a look at stocks that have been lodged in overbought territory for at least four straight days -- that is, their RSI has been north of 70 -- and may be vulnerable to selling. A look at the table below -- which comes courtesy of White -- reveals a number of biotech stocks on the overbought list, including Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Celgene Corporation (NASDAQ:CELG), and ImmunoGen, Inc. (NASDAQ:IMGN).


150724overbought

As you can see above, ALXN has been in overbought territory for the past eight sessions, and currently boasts an RSI of 76. This is mostly the result of the stock's rapid upside move. Since its June 9 close, the shares have soared 28% to trade at $203.28 -- and yesterday notched a record high of $208.88.

With the company due to report earnings next Thursday morning, option traders have been upping the bearish ante. Specifically, over the last 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 2.13 Alexion Pharmaceuticals, Inc. puts for every call -- a ratio that ranks just 3 percentage points from an annual high. In other words, traders have been initiating long puts over calls at a near-extreme rate recently, suggesting they'd welcome a pullback from the outperformer.

Meanwhile, CELG's RSI has been above 70 for six straight days, and currently checks in at 82. Perhaps this explains why -- even after yesterday's earnings beat that boosted the equity to an all-time peak of $140.72, and receiving no fewer than six price-target hikes overnight -- the stock is off 2.1% at $136.13. The momentum may simply be starting to ease after a rapid run-up, which included a massive mid-July bull gap on news of the firm's Receptos Inc (NASDAQ:RCPT) buyout agreement.

Option traders have been rushing to Celgene Corporation's bullish bandwagon. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio checks in at 2.59 -- higher than four-fifths of similar readings recorded in the last 12 months. Analysts have been excited, as well, with 80% doling out "buy" or better ratings.

Finally, IMGN -- which has nearly tripled in value this year at $17.90, and recently touched an annual high -- is fresh off an eight-day streak on the overbought list. At last check, though, the stock's RSI has slipped below 70, at 67.

Option traders and short sellers alike are rolling the dice on a pullback. ImmunoGen, Inc.'s 10-day ISE/CBOE/PHLX put/call volume ratio of 0.47 sits just 9 percentage points from an annual peak. Plus, 13.7% of the stock's float is sold short, representing eight sessions' worth of trading, at typical daily volumes. IMGN will report earnings one week from today.
Published on Jul 23, 2015 at 12:23 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Analysts are weighing in today on biotech Cara Therapeutics Inc (NASDAQ:CARA), tech firm F5 Networks, Inc. (NASDAQ:FFIV), and mining giant Freeport-McMoRan Inc (NYSE:FCX). Here's a quick roundup of today's brokerage notes on CARA, FFIV, and FCX.

  • Shares of CARA are blowing up, after the company released encouraging results from a Phase 2 trial of its uremic pruritus treatment. Stoking the bullish flames is a pair of price-target hikes to $27 at Needham and Janney. At last check, Cara Therapeutics Inc was up 35.7% at $21.50 -- just off an earlier annual high of $21.66. This price action stands in stark contrast to what's being witnessed on the charts of this sector peer, which is fresh off an annual low. Longer term, CARA has more than doubled in value in 2015. One group that's not being caught off-guard by the upward gap is the brokerage bunch, as 100% of analysts have doled out "strong buy" recommendations on the stock.

  • FFIV has soared 9.3% to trade at $129.50, resting just below its year-to-date breakeven mark. The positive price action is the result of an earnings beat and subsequent round of price-target hikes -- with no fewer than a dozen brokerages boosting their targets. In options land, bettors are tilted in a decisively skeptical direction. Over the last two weeks, more than three F5 Networks, Inc. puts have been bought to open for each call across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The resultant put/call volume ratio of 3.41 sits just 9 percentage points from an annual bearish extreme.

  • FCX is continuing its collapse at midday, down 8.2% at $13.82, and fresh off a six-year low of $13.30. Sparking today's sell-off is a quarterly net loss of more than $1.8 billion, due to sinking commodity prices -- though the firm's adjusted per-share profit of 14 cents topped estimates. But that's not all -- Jefferies also hit Freeport-McMoRan Inc with a $9 price-target cut to $19. Additional bearish notes could be forthcoming, as well. After all, two-thirds of analysts currently rate FCX a "buy" or better, and its consensus 12-month price target of $24.81 stands at a nearly 80% premium to current trading levels.

For other stocks in analysts' crosshairs, read Analyst Upgrades: SanDisk Corporation, Cirrus Logic, Inc., and Fortinet Inc and Analyst Downgrades: Qualcomm, Texas Instruments Incorporated, and Keryx Biopharmaceuticals.

Published on Jul 23, 2015 at 1:53 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview

It's been a hot-and-cold start to earnings season, with notable names such as Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) tumbling in the wake of their results, while others such as Google Inc (NASDAQ:GOOGL) and SanDisk Corporation (NASDAQ:SNDK) soared following their reports. There's still plenty of action on tap, too, with e-commerce issue Amazon.com, Inc. (NASDAQ:AMZN), coffee concern Starbucks Corporation (NASDAQ:SBUX), and networking specialist Juniper Networks, Inc. (NYSE:JNPR) all reporting after tonight's close. Below, we'll take the pre-earnings temperature of AMZN, SBUX, and JNPR.

  • Over the past eight quarters, AMZN has averaged a single-session post-earnings move of 9.9%. The options market has upped their forecast for this time around, now expecting AMZN to swing 9.4% in the session subsequent to reporting -- based on the stock's near-term at-the-money (ATM) straddle. It appears option traders are expecting the action to resolve to the downside. Specifically, AMZN's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.90 ranks in the 71st annual percentile. Regardless, premium on the equity's short-term options is currently pricing in relatively high volatility expectations. In fact, the stock's Schaeffer's Volatility Index (SVI) of 47% is docked 13 percentage points from a 52-week peak. On the charts, Amazon.com, Inc. has added an impressive 55% year-to-date to trade at $481.38, and hit an analyst-induced record peak of $493.20 on Monday.

  • Call buyers have been flooding SBUX's options pits ahead of tonight's results. At the ISE, CBOE, and PHLX, the stock's 50-day call/put volume ratio of 2.19 sits higher than 89% of all comparable readings taken in the past year. Short-term speculators are willing to pay inflated premiums, as well, considering the equity's 30-day ATM implied volatility (IV) of 25.4% rests in the 95th percentile of its annual range. Historically, SBUX has averaged a single-session post-earnings move of 3.3% over the past eight quarters -- six of which have been to the upside. Looking at the equity's near-term ATM straddle reveals the options market is expecting a bigger move of 4.4% for tomorrow's trading. Today, the stock is flirting with a 0.1% lead at $56.73, and earlier topped out at an all-time high of $57, after announcing a new partnership with car service Lyft

  • JNPR is also higher this afternoon -- up 0.7% at $26.38, and extending its year-to-date advance to 18.1%. In fact, the stock is within striking distance of its May 27 annual high of $28.26. In the options pits, speculators have been initiating long calls over puts at a near-annual-high clip in recent months, per JNPR's 50-day ISE/CBOE/PHLX call/put volume ratio of 2.91 -- in the 96th annual percentile. Meanwhile, the stock's 30-day ATM IV of 42.3% is just 1 percentage point off of a 12-month peak. Looking back over the past eight quarters, Juniper Networks, Inc. has experienced a post-earnings swing -- on average -- of 5.9%. This time, the stock's near-term ATM straddle is suggesting a bigger 8% move.
Published on Jul 23, 2015 at 1:54 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Intraday Option Activity
Ambarella Inc (NASDAQ:AMBA) jumped to a record high of $129.19 this morning, and was last seen up 2.8% at $125.94. Since the start of 2015, shares of the GoPro Inc (NASDAQ:GPRO) supplier have soared nearly 150%. Option traders are responding to today's technical milestone, with calls changing hands at 1.8 times the usual intraday rate.

Diving deeper, AMBA's weekly 7/24 130-strike call is the most active option, and signs point to buy-to-open activity. By purchasing these out-of-the-money calls, speculators are expressing confidence the shares will topple the round-number $130 level by tomorrow's close, when the series expires.

This marks a change of pace, relative to recent data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the last 10 weeks across those exchanges, AMBA's amassed a put/call volume ratio of 0.89 -- outstripping 82% of comparable readings taken over the previous year. In other words, traders have initiated long puts over calls at a faster-than-usual clip.

It's worth noting that now appears to be an opportune time to purchase AMBA's short-term options. The stock's Schaeffer's Volatility Scorecard (SVS) of 80 suggests the shares have tended to make outsized moves over the past 12 months, relative to what the options market has priced in.

As alluded to earlier, Ambarella Inc (NASDAQ:AMBA) has a close relationship with GPRO, providing the camera maker with microchips. The latter company is making headlines today, amid its integration with real-time streaming app Meerkat. GoPro Inc (NASDAQ:GPRO) shares are also crushing it, up nearly 5%, at last check.
Published on Jul 23, 2015 at 2:33 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Strategies and Concepts

At Schaeffer's, we use numerous indicators in our writing to describe stock and trader behavior. While at first some of these things may seem confusing, in reality, they're quite simple to understand -- and can provide valuable insight for options traders. Below, we'll look at a few terms we regularly use in our coverage at SchaeffersResearch.com to clear up any confusion you might have.

Among our go-to data points are option volume ratios derived from information we receive from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Basically, we take all of the puts and calls that have been bought to open across these exchanges and put them into ratios. So we may say something like, "XYZ's 10-day call/put volume ratio at the ISE, CBOE, and PHLX comes in at 2.50." This means that for every XYZ put that's been bought to open during the specified time frame (10 sessions, in this case), 2.50 calls have been bought to open.

Since, based on the above information, long call volume has easily outweighed long put volume, it'd be easy to say that XYZ speculators have been extremely bullish (since they've bought to open more calls) during the past 10 days. However, we like to see how that ratio stacks up against XYZ traders' previous behavior, so we compare it to all other 10-day ratios from the previous year. Therefore, using our hypothetical 10-day ISE/CBOE/PHLX call/put volume ratio of 2.50, we could say something like, "This ratio lands in the 95th percentile of its annual range."

If you've ever taken a standardized test, this terminology should be familiar to you. A call/put volume ratio in the 95th annual percentile tells us that it is higher --  and seemingly more bullish -- than 95% of others from the past year. In other words, XYZ option traders have bought to open calls over puts at a faster rate only 5% of the time in the past year.

Another one of our favorite indicators is the Schaeffer's put/call open interest ratio -- or SOIR. The main difference between this and the volume ratios we just described is that SOIR accounts for all open interest -- whether bought or sold -- not just buy-to-open activity. More specifically, the SOIR measures the open interest for puts and calls in a stock's front three-month series, which let's us see how traders with short-term objectives are positioning themselves. Like the volume ratios, we highlight SOIR percentile ranks to determine how call- or put-skewed speculators are.

The last indicator we'll highlight here is the Schaeffer's Volatility Index, or SVI, which can be particularly useful during earnings season. In the simplest terms, SVI essentially tells us if traders are overpaying or underpaying for a stock's front-month options, from a historical perspective. The SVI averages the implied volatility of front-month options that are at the money. Then, by using a percentile rank, we can determine if those options are seemingly cheap or expensive, from a volatility perspective. So, if you hear us say that "XYZ's SVI of 49% ranks in the 95th annual percentile," you may want to put your money elsewhere, as volatility expectations are historically high. 

To get real-time options updates using these and other indicators, follow @Schaeffer's on Twitter

Published on Jul 23, 2015 at 2:53 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
It's been a rough week for oil-and-gas names, which have struggled in step with crude. Chesapeake Energy Corporation (NYSE:CHK) is no exception, with the shares down 19% from last Friday's close. In addition to feeling the heat from a sell-off in crude, CHK has also been pressured by news of  suspended dividend payment and a subsequent bearish brokerage note. Today, in fact, CHK hit a 12-year low of $8.40, and was last seen down 2.2% at $8.85.

The worst isn't over, according to option players. With a little over an hour left in today's trading, intraday put volume has popped to four times what's typically seen at this point in the day, and a number of speculators are calling for even lower lows over the next several months.

Among the strikes seeing the most action in CHK's options pits today are the October 8 and 11 puts. Drilling down, it appears one speculator may be rolling down her bearish bet by selling to close the higher-strike puts, and buying to open the lower-strike puts. If this is indeed the case, the goal is for the stock to breach the $8 mark for the first time since May 2003 by the close on Friday, Oct. 16 -- when the options expire.

Elsewhere, it looks as if another group of traders is setting their sights even lower -- eyeing a move to levels not seen since October 2002. Specifically, it seems safe to assume new positions are being purchased at CHK's October 6 put. Delta on the put is docked at negative 0.18, suggesting a less than 1-in-5 chance the option will be in the money at expiration.

Regardless of where Chesapeake Energy Corporation (NYSE:CHK) settles at October options expiration, these put buyers can rest easy knowing the most they have on the line is the initial premium paid. In fact, limited risk is one of the many advantages stock options offer.
Published on Jul 23, 2015 at 9:23 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

U.S. stocks could extend their recent losses today, as earnings season fails to impress. In company news, today's stocks to watch include sports apparel designer Under Armour Inc (NYSE:UA), financial firm Bank of America Corp (NYSE:BAC), and healthcare concern CIGNA Corporation (NYSE:CI)

  • UA is poised to open at an all-time high, after the company topped expectations in the earnings confessional and upped its full-year sales forecast once again. Specifically, the shares are up 3.2% in pre-market trading, after finishing at $89.37 yesterday. This expected technical milestone could have short sellers shaking in their boots. Over 8% of Under Armour Inc's float is sold short, which would take more than eight sessions to repurchase, at the stock's typical daily volumes. In other words, there's plenty of sideline cash available to boost UA to even higher highs.

  • BAC Chief Financial Officer Bruce Thompson is stepping down, and will be replaced by Paul Donofrio, headlining a round of upper management changes. On the charts, the stock hit a five-year high of $18.48 yesterday, before settling at $18.45 -- up 3.1% in 2015. Skepticism is running high in Bank of America Corp's options pits, however. During the last 50 days on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has racked up a put/call volume ratio of 0.24 -- higher than nearly three-quarters of comparable readings from the past year. In other words, speculators have been buying to open BAC puts over calls at an accelerated clip.

  • Finally, Anthem Inc's (NYSE:ANTM) $48 billion acquisition of CI -- roughly $188 per share -- could be announced by week's end, according to inside sources. The rumblings have CIGNA Corporation poised to gap 5% higher at the open. Longer term, the stock has been a beast, surging close to 47% year-to-date at $151.07, and perched atop its 10-week moving average. Option bulls should be happy. CI's 10-day ISE/CBOE/PHLX call/put volume ratio of 7.57 ranks in the 86th percentile of its annual range.

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Published on Jul 23, 2015 at 9:24 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Upgrades

Analysts are weighing in today on storage device specialist SanDisk Corporation (NASDAQ:SNDK), integrated circuit issue Cirrus Logic, Inc. (NASDAQ:CRUS), and cybersecurity stock Fortinet Inc (NASDAQ:FTNT). Here's a quick roundup of today's bullish brokerage notes on SNDK, CRUS, and FTNT.

  • SNDK is up 12% in electronic trading, after the company's second-quarter profit roughly doubled the average analyst estimate. Adding to the bullish buzz are upgrades to "buy" at B. Riley and BofA-Merrill Lynch, as well as price-target hikes from no fewer than four brokerage firms. (Jefferies and Stifel, however, lowered their respective target prices.) Today's projected price move will provide a much-needed boost for a stock that's down nearly 45% year-to-date at $54.18 -- and fresh off a two-year low of $53.18. Against this backdrop, sentiment around the Street is skewed toward the skeptical side. In the options pits, specifically, SanDisk Corporation's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 4.11 ranks 3 percentage points from a 52-week peak.

  • CRUS -- a big supplier for struggling Apple Inc. (NASDAQ:AAPL) -- is also set to pop in the wake of a strong quarterly report, up 10% ahead of the bell. What's more, Stifel boosted its outlook on the shares to "buy" from "hold," while Northland Securities upped its price target to $45 from $44 -- territory not charted since September 2012. While the security has done well in 2015 -- up 30% at $30.71 -- CRUS has more recently pulled back to its 180-day moving average after hitting a two-year high of $38.20 in late May, and closed just north of this trendline last night. Meanwhile, short-term option speculators are more put-skewed now than at any other time in the past year -- Cirrus Logic, Inc.'s Schaeffer's put/call open interest ratio (SOIR) of 1.51 rests higher than all comparable readings taken over the last 12 months.

  • Stellar second-quarter earnings and a subsequent round of bullish brokerage notes has FTNT up 11.6% in electronic trading -- and on its way to take out its June 18 all-time peak of $44.12. Among the many names chiming in on the stock was J.P. Morgan Securities, which raised its rating to "overweight," as well as Oppenheimer and JMP Securities -- which each boosted their price targets to $55. Longer term, FTNT has rallied almost 38% year-to-date -- thanks to a rash of recent cyber attacks -- to trade at $42.30. Put players have been active, though, and at the ISE, CBOE, and PHLX, Fortinet Inc's 10-day put/call volume ratio of 4.58 arrives in the 98th annual percentile. Simply stated, puts have been bought to open over calls at a faster clip just 2% of the time within the past year.

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Published on Jul 23, 2015 at 9:49 AM
Updated on Mar 19, 2021 at 7:15 AM
  • VIX and Volatility

We saw a kind of ugly open yesterday, after a dip on Tuesday, further supporting the theory that we are never going to break out of this S&P 500 Index (SPX) range this year. Thank you, Apple Inc. (NASDAQ:AAPL).

But hey, there's some good news if you like volatility products and like the ability to trade vol after hours. We now have weekly CBOE Volatility Index (VIX) futures! From CBOE Options Hub:

"CFE plans to list futures with weekly expirations on the CBOE Volatility Index®(VIX) beginning at 3:30 P.M. CT on Wednesday July 22 (this is the beginning  of the July 23 trading day), subject to regulatory review. VIX Weeklys options at CBOE are expected to follow on a later date, also subject to regulatory approval." 

Because hey, why not? I mean that seriously. Why not list everything you can?

One of the complaints about vol products is that they don't actually track VIX closely enough. But you can solve that to some extent by either going larger in quantity or shorter in duration. But alas, that "shorter in duration" option only exists later in the monthly cycle. At least, until today. 

CBOE has an interesting chart on the subject. Here's the beta of VIX futures expressed by days until expiration:

150723Warner

 

The beta for 33 days is 0.39, but as you can see it rises exponentially as expiration nears. It gets to about 0.5-0.6 with a week to go, and peaks at 0.79 with a day to go. 

And that leads me to a question that sounds like a joke, but is totally serious: Why don't we list 1-day VIX futures?

There's kind of a holy grail out there of trying to find the best way to trade "spot" VIX. Monthly VIX futures came first, but the reality is they just let you bet on where traders expect to price 30-day implied volatility from some date "X" days in the future. Plus, they're not actually a stock, so some are precluded from using them. 

Enter iPath S&P 500 VIX Short-Term Futures ETN (VXX), a stock that sounded like VIX! Unfortunately, it's just a 30-day future disguised as a stock and… Well, you know the rest. And remember AccuShares Spot CBOE VIX Fund Up Shares (VXUP) and AccuShares Spot CBOE VIX Fund Down Shares (VXDN)? Those haven't worked out either, unless you want More VXX!

So enter shorter-term futures. They're not exactly VIX, either, for the same reason longer-dated futures are not actually VIX. Plus, they're futures and not stocks. But as the chart shows, they will track exponentially closer, which at the end of the day is what the masses want.

What's the harm in listing VIX futures every couple of days? It would afford the chance to really tailor the VIX bets at all times. And frankly, that's how we should all "trade" VIX. Timing is everything. We've heard about how low VIX has sat for pretty much forever -- or at least five years. Lots of money is lost trying to catch the "inevitable" longer-term VIX rally that never comes; maybe we can emphasize shorter-term VIX bets? And what better way to do that than always have really short-term VIX paper out there?

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

Published on Jul 23, 2015 at 9:54 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Downgrades

Analysts are weighing in on chipmakers QUALCOMM, Inc. (NASDAQ:QCOM) and Texas Instruments Incorporated (NASDAQ:TXN), as well as kidney disease specialist Keryx Biopharmaceuticals (NASDAQ:KERX). Here's a quick roundup of today's bearish brokerage notes on QCOM, TXN, and KERX.

  • It's been a rough ride for QCOM in 2015, down 16% at $62.40. To the delight of option traders, the equity is extending this negative price action today -- off 2.7% -- after the firm offered up a weak current-quarter forecast, and confirmed plans to explore cost-cutting measures. Also pressuring the shares is a bevy of price-target cuts, including ones from Susquehanna (to $60) and Topeka Capital (to $65). Should QUALCOMM, Inc. continue its downward trajectory, another round of bearish brokerage notes could be on the horizon. More than half of those following the shares currently maintain a "buy" or better rating, while the average 12-month price target of $74 stands at an 18.6% premium to QCOM's present price.

  • TXN also provided a lackluster third-quarter forecast, due to a "generally softer market," prompting a number of brokerage firms to downwardly revise their price targets. Included in the bunch were Baird and Deutsche Bank, which reduced their target prices to $49, and Morgan Stanley, which lowered its price target by $4 to $46. However, the stock is up 1.3% at the open to trade at $49.95 -- and pare its year-to-date deficit to 6.5%. In the options pits, short-term speculators have been more put-heavy than usual toward Texas Instruments Incorporated. Specifically, the equity's Schaeffer's put/call open interest ratio (SOIR) of 2.22 ranks in the 65th annual percentile.

  • KERX tumbled to a new annual low of $8.69 out of the gate -- and was last seen 3.9% lower at $9.17 -- after Cowen and Company cut its rating to "market perform" from "outperform." Heading into today's session, the stock had already shed about a third of its value in 2015, and short sellers have been gambling on even steeper losses. In fact, short interest surged 11.9% in the last two reporting periods, and now accounts for more than 40% of Keryx Biopharmaceuticals' available float.
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Published on Jul 23, 2015 at 11:01 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Most Active Weekly Options
The 20 stocks listed in the table below have attracted the highest total weekly options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are microblogging site Twitter Inc (NYSE:TWTR) and wearable camera maker GoPro Inc (NASDAQ:GPRO).

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Weekly strikes have been popular on TWTR in recent sessions, and it's no different today. In fact, the weekly 7/24 series accounts for seven of the stock's 10 most active options. This morning, potential buy-to-open activity is transpiring at the weekly 7/24 36-, 36.50-, and 37-strike calls, as speculators wager on end-of-week gains.

Taking a step back, TWTR calls have been popular on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the last two weeks, traders have bought to open 3.24 calls for every put across this trio of options, and the corresponding call/put volume ratio ranks in the 83rd annual percentile.

Technically speaking, Twitter Inc is 1.5% higher today at $36.62, taking a bounce off of its 50-day moving average -- despite a price-target cut to $47 from $55 at Brean Capital. Looking ahead, TWTR will report earnings after the close next Tuesday. In the session following the company's last six turns in the confessional, the stock has moved an average of 14.6% in either direction. This time around, the options market is pricing in a 12.4% swing, based on near-term at-the-money straddle data.

Meanwhile, GPRO has shot up 4.1% to trade at $64.22. This is good news for shareholders, who watched the stock's earnings-induced momentum succumb to broad-market headwinds yesterday, to end on a slight loss. Longer term, the equity has soared 73% since hitting an annual low of $37.13 on March 10.

Positive momentum has been building in GPRO's options pits, as well, where the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.50 checks in above 85% of comparable readings from the past year. Today, calls are running at five times the average intraday clip, and more than twice the rate of puts.

Not everyone's on GoPro Inc's bullish bandwagon, though. Short interest rose 12.6% during the latest reporting period, and makes up close to 18% of the stock's total float. An unwinding of these bearish bets could add fuel to GPRO's fire.

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