Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Sep 8, 2016 at 9:18 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

U.S. stocks could struggle today, after the European Central Bank (ECB) decided to sit on its hands. Among specific equities in focus are truck manufacturer Navistar International Corp (NYSE:NAV), home retailer Pier 1 Imports Inc (NYSE:PIR), and grocery stock SUPERVALU INC. (NYSE:SVU).

  • NAV has slumped 3.8% in pre-market trading, just two days after gapping higher on major investment news. Pressuring the stock ahead of the open is the firm's surprising third-quarter loss and weaker-than-expected sales -- not to mention a Department of Defense subpoena. Technically speaking, Navistar International Corp shares are sitting pretty following the aforementioned bull gap, closing yesterday at $19.02 -- and more than doubling on a year-to-date basis. Yet, short interest on the stock is sky-high. Specifically, 23% of NAV's float is sold short, representing 12 days' worth of trading activity, at the equity's typical volumes.
  • PIR is even worse off, cratering 13.5% in electronic trading on weak preliminary second-quarter results, including a 4.3% drop in same-store sales. What's more, CEO Alex Smith will abandon his post by year-end. Also shaking Pier 1 Imports Inc shares, Oppenheimer, Raymond James, and Credit Suisse lowered their ratings, while a handful of other analysts slashed their price targets. Since topping out at $7.70 in mid-April, the stock has been battered, settling Wednesday at $4.80. Not surprisingly, PIR's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is a top-heavy 6.53 -- only 8 percentage points from an annual peak.
  • SVU could be today's Sprouts Farmers Market Inc (NASDAQ:SFM). The latter sparked a sector-wide sell-off yesterday on a profit warning, and SUPERVALU INC. could now do the same. The budget grocery chain cited "softer than previously anticipated" second-quarter retail sales, and downwardly adjusted its full-year outlook. As such, SVU is off 9.5% ahead of the bell, and has already surrendered 19.3% year-to-date to trade at $5.47. This should come as good news to options traders, who have been betting more pessimistically than usual of late. The stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.72 ranks in the bearishly skewed 83rd percentile of its annual range.

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Published on Sep 7, 2016 at 12:32 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Stock Market News
  • Intraday Option Activity
Twitter Inc's (NYSE:TWTR) board of directors is due to meet on Thursday in San Francisco, and once again the M&A rumor mill is swirling with possibilities that range from a corporate takeover by Alphabet Inc (NASDAQ:GOOGL) to going private. All of this buyout gossip, combined with general sector tailwinds for social and internet stocks, has TWTR sitting up 0.6% at $20.05 -- and the stock's options crossing the tape at a faster rate than usual.

TWTR options are running at nearly 1.5 times their usual intraday pace, with more than three times as many calls as puts crossing the line. All 10 of the most active options are calls, and the put/call ratio of 0.31 is higher than just 14% of all other readings from the past year. The most active is the weekly 9/9 20.50-strike call, and buyers of the option are looking for an extended rally for TWTR shares through expiration at the end of the week -- which encompasses the aforementioned board meeting.

But even before today, optimism was running high in the TWTR option pits, with its 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sitting at 3.52, in the 91st percentile of its annual range. Echoing this, TWTR's call open interest is currently in the 87th percentile of its annual range, with the September 20 call dominating the front-month series.

Twitter Inc (NYSE:TWTR) has added more than 33% in the past three months, enjoying a perch atop its 10-week moving average since mid-June, and just last week closed on top of its 10-month moving average for the first time since March 2015. However, TWTR rallies have tended to stall out in the $20-$21 region since January, with $21 representing a 50% premium to the stock's lows near $14.

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Published on Sep 7, 2016 at 12:38 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stock Market News
  • Stocks On the Move
  • Intraday Option Activity
Like this fellow biotech, Agios Pharmaceuticals Inc (NASDAQ:AGIO) is burning up the charts. The drug stock has jumped 21.2% at $45.23 -- making it one of the biggest gainers on the Nasdaq, and representing its best day in roughly one year -- after partner Celgene Corporation (NASDAQ:CELG) said it expects to submit a new drug application (NDA) for experimental cancer treatment enasidenib by year-end. Not surprisingly, AGIO shares and options are trading at an extreme rate.

At last check, over 3 million AGIO shares and 4,200 options have changed hands, putting both on track for annual highs. Looking more closely, put volume has absolutely skyrocketed, at more than 150 times the usual intraday rate.

However, not all of these puts are of the bearish sort. The most active strike is the out-of-the-money October 45 put, and based on International Securities Exchange (ISE) data, the vast majority of the contracts have been sold to open. In other words, options traders are betting against AGIO breaching $45 by back-month expiration, at the close on Friday, Oct. 21.

Today's preference for short-term puts over calls is business as usual. Agios sports a Schaeffer's put/call open interest ratio (SOIR) of 1.29, with puts outstripping calls among options in the front three-months' series. On top of that, this SOIR ranks just 3 percentage points from an annual peak, suggesting near-term put open interest is approaching extreme levels.

On the charts, though, today's upward gap represents a dramatic break from the norm. Agios Pharmaceuticals Inc (NASDAQ:AGIO) was getting absolutely destroyed heading into the session, down 43.5% from its most recent peak in early June. Right now, though, the shares have a chance to post their first close above their 100-day moving average since late June.

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Published on Sep 7, 2016 at 2:45 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Stock Market News
  • Intraday Option Activity
According to our internal Sector Scorecard, airline stocks are in a good position to fly. Two-thirds of the stocks we cover in the "Aerospace Airlines" sector are above their 80-day moving average, plus the average 52-week return among these names is 9.5%. Despite this, short interest has exploded 23% higher year-over-year, suggesting there's proverbial fuel left in the tank. Two names making good on this upside potential today are American Airlines Group Inc (NASDAQ:AAL) and Southwest Airlines Co (NYSE:LUV).

The sector is getting a lift after LUV said it plans to slow capacity growth next year, which could positively impact revenue. Plus, Delta Air Lines, Inc. (NYSE:DAL) Chief Financial Officer Paul Jacobson said industry sales trends have been improving, adding, "We see a lot of signs, reasons to be optimistic." All told, the Dow Jones Transportation Average (DJT) is on track for its biggest percentage gain in a month, adding 1.4%.

Diving into stock-specific performance, AAL has soared 5.7% to $39.06 to test its 320-day moving average for the first time in 2016. Since bottoming in late June at $24.85, the shares have advanced a brow-raising 57%. Meanwhile, the stock's call options are changing hands at triple the expected clip for this point in the afternoon, with potential buy-to-open activity detected at the weekly 9/9 38 strike -- the equity's most active option so far.

This represents a sharp break from the prevailing trend toward puts, seen across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past two weeks, traders have bought to open 1.25 puts for every call on AAL, and that ratio ranks just 1 percentage point from an annual peak. While some puts may have been purchased by shareholders hedging, a capitulation among "vanilla" bears could translate into tailwinds.

Plus, as stated previously, an unwinding of short interest could act as another positive catalyst for American Airlines Group Inc. Specifically, the stock's short-interest ratio is 5.80, meaning it would take more than a week for shorts to cover their bearish positions, at AAL's typical volumes.

Turning to LUV, the shares are up nearly 5% at $38.76, and on track for their highest close since gapping lower on earnings in late July. Meanwhile, the stock's options pits are in overdrive, with calls running at quadruple the anticipated intraday rate, and about five times the pace of puts. In the lead is the January 2017 38-strike call, and from the looks of it, traders are purchasing new positions here, confident in the shares' long-term prospects.

By no means are these the only option bulls on Wall Street. Southwest Airlines Co sports a 10-day ISE/CBOE/PHLX call/put volume ratio of 4.91, with long calls nearly quintupling puts. Furthermore, the ratio sits in the top quartile of its 12-month range, suggesting options traders have been more bullish than usual. Of course, given that short interest jumped 28% in the most recent reporting period, it's also possible calls were purchased by short sellers seeking protection against a sharp upside move -- not unlike the one we're seeing today.

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Published on Sep 7, 2016 at 2:49 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
  • Stock Market News

Apple Inc. (NASDAQ:AAPL) CEO Tim Cook took the stage in San Francisco this afternoon, at an event held to reveal the company's latest line of products. As generally expected, this has so far included the new iPhone 7 and an updated iteration of the Apple Watch, plus a new partnership with Nike Inc (NYSE:NKE), via the Apple Watch Nike+.

In addition to fresh product features for the iPhone 7, such as water resistance and an improved camera, it was revealed that Nintendo's "Super Mario Run" will soon come to the App Store, while Pokemon Go will be made available on the Apple Watch. So far, however, traders appear less than enthused, with shares of AAPL last spotted 0.2% lower at $107.46.

Technically speaking, today's slump shouldn't come as a huge surprise. After all, the shares have spent the last few weeks taking a breather, after a long recovery over the summer brought them back above the $100 century mark. Since then, the stock has run into trouble at the $110 level, as AAPL faces double-barred resistance from its 20- and 320-day moving averages. Potentially reinforcing this speed bump, heavy call open interest currently resides at the 110 strike in the September, October, and January 2017 series.

Today, AAPL calls are slightly accelerated, with the weekly 9/9 series continuing to be popular. The 108-strike call is the most active option thus far, with some buy-to-open action spotted, hinting at bullish expectations through week's end, when the series expires.

A bright spot for buyers is that premium on AAPL's near-term options should be pricing in low volatility expectations right now. The stock's Schaeffer's Volatility Index (SVI) of 21% ranks in the low 14th percentile of its annual range, while its 30-day at-the-money implied volatility sits lower than 92% of the past year's readings, at 18.3%. Plus, Apple Inc.'s (NASDAQ:AAPL) Schaeffer's Volatility Scorecard (SVS) of 89 suggests the shares have made bigger moves than the options market has priced in over the previous 52 weeks.

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Published on Sep 7, 2016 at 3:11 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Stock Market News
  • Intraday Option Activity

Athletic apparel issue Nike Inc (NYSE:NKE) popped higher this afternoon, on news of a partnership with Apple Inc. (NASDAQ:AAPL). The duo are teaming up for the new Apple Watch, and NKE shares are up 0.6% at $57.74 -- a session high -- in response. What's more, NKE options are trading at a faster-than-usual clip, as speculators roll the dice on the stock's short-term trajectory.

NKE put options are crossing the tape at twice the average intraday pace, though much of that volume is attributable to action that transpired ahead of the AAPL announcement. Specifically, it looks like traders this morning bought to open October 55 puts, which will move into the money if NKE breaches $55 before options expiration on Friday, Oct. 20 -- which encompasses Nike's next earnings release on Sept. 27.

Since the AAPL announcement, the stock's weekly 9/9 58-strike calls have grown popular, with more than 2,400 contracts traded on open interest of fewer than 221. Buyers of the calls expect NKE to extend today's uptrend and topple $58 before the close on Friday, when the weekly contracts expire.

More broadly speaking, call buying has been a popular strategy in NKE's options pits of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NKE has racked up a 10-day call/put volume ratio of 1.65 -- higher than 74% of all other readings from the past year. In other words, options buyers have initiated bullish bets over bearish at a faster-than-usual rate during the past two weeks.

Nike Inc (NYSE:NKE) has rebounded 12.2% off its late-June low of $51.47, but is now staring up at its 50-week moving average. This trendline helped usher NKE to a record high in late December, but could now translate into a speed bump. However, if history is any indicator, NKE will extend its third-quarter run higher.


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Published on Sep 7, 2016 at 3:26 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Analysts are weighing in on fiber optics expert Applied Optoelectronics Inc (NASDAQ:AAOI), as well as biotech stocks Ligand Pharmaceuticals Inc. (NASDAQ:LGND) and Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). Here's a quick roundup of today's brokerage notes on AAOI, LGND, and MNTA.

  • Bullish analyst notes are coming through on AAOI, after the company raised its current-quarter outlook. At least six brokerage firms have raised their price targets on the stock, including Piper Jaffray, which set its mark at $24 -- territory not charted since July 2014. The brokerage firm said it believes the company "is in a position to see impressive growth over the next several quarters." As such, Applied Optoelectronics Inc is up 14.8% at $19.90, and could run higher if short sellers begin to cover. Currently, short interest accounts for one-fourth of the stock's float, or 8.4 times the average pace of trading.
  • LGND is up 5.9% at $114.47, following a price-target increase to $151 from $149 at Roth Capital. Specifically, the brokerage firm said positive mid-stage trial data for Retrophin Inc's (NASDAQ:RTRX) kidney drug, sparsentan -- which LGND holds the rights to -- is "an important win" for both companies. Bullish analyst attention is nothing new for the stock, which boasts four "strong buy" recommendations, versus a single "strong sell." This optimism appears well-deserved, though, since Ligand Pharmaceuticals Inc. sports a roughly 21% year-over-year lead, even after a major pullback last month. 
  • MNTA is sliding after a downgrade to "sell" from "hold" at Maxim. The shares have shed 4% to trade at $11.74, bringing their losses for the year to almost 21%. If Momenta Pharmaceuticals, Inc. continues to struggle on the charts, a round of bearish analyst attention could create additional headwinds. The majority of analysts on Wall Street consider the stock a "strong buy," despite its disappointing performance, without a single "sell" to be found.
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Published on Sep 7, 2016 at 6:30 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Indicator of the Week

It seems to me that the market has barely moved in the last couple of months. In reality, the S&P 500 Index (SPX) is up almost 2.5%. Annualized, that is a very satisfactory return of over 15%. It has been a very boring slog, though. The last time the index moved at least 1% in either direction was July 8, or 41 trading days ago. This week, I'll take a look at other times in the past when we've had such long streaks of sub-1% moves. How long can the streaks last, and what happens when they end?

Prior Streaks: Again, it has been 41 trading days since the S&P 500 gained or lost 1% for a single day. Going back to 1928, this is the 32nd time a streak has lasted this long (the first occurrence wasn't until 1944). The last time it happened was in June 2014. The first table below summarizes how the SPX has performed after the streak got to 41 trading days. The second table shows the typical returns since 1944, for comparison. The market has underperformed after prior instances of these streaks over the next two weeks to six months, according to the data below (I'm focusing on the average return and percent positive). Also, the standard deviation of returns is lower, which I expected, since these signals indicate low-volatility periods.

SPX chart1

I mentioned that the index was up a respectable 2.5% since the streak began. This is a pretty good return normally, but compared to the other streaks, it is actually a poor return (8th worst return, to be exact). The tables below break those prior 31 occurrence down by whether the index gained less than 4% during the streak (like this time) or more than 4%. You can see the stock returns are worse going forward when the returns during the streak are less than 4%. The return over the next three months averaged a loss of about 1% and was positive just half the time, when the return during the streak was less than 4%. Otherwise, the index gained more than 1.5% over the next three months, and was positive about 65% of the time. 

SPX chart2 index returns

When the Streak Ends: When will this streak end? It's pretty hard to tell. The prior streaks that reached at least 41 trading days lasted an average of 68 days, or just over three months. In that case, we have another month to go. However, the longest streak was 184 trading days. That occurred in 1963 and is one of three times the streak lasted for more than 100 trading days. 

Is there anything we should expect once the streak does end? Well, not really. The returns, again, slightly underperform the market from two weeks to six months, with slightly less volatility than usual. According to all this, investors should be prepared for nothing exciting going forward. 

SPX chart 3 streak ends

Here's one last thing I looked at. When the streak does finally end, does it matter whether it ends with a positive 1% move or a negative 1% move? First, note that about 70% of the streaks ended with the market going down by at least 1%, rather than up. Looking at the longer-term returns (three and six months), the market has tended to do better when the streak ends positively rather than negatively. However, the data size is too small for anything to be conclusive.

SPX chart 4 positive returns

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Published on Sep 7, 2016 at 8:47 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Overseas Trading
Markets in Asia ended the session mostly lower, after Tuesday's Institute for Supply Management (ISM) non-manufacturing index in the U.S. came in at its lowest level in more than six years. The data has traders lowering expectations that the Federal Reserve will raise interest rates this month, causing the U.S. dollar to weaken against a basket of foreign currencies.

Specifically, a stronger yen weighed on exporters in Japan, sending the Nikkei down 0.4% on the day. Elsewhere in the region, Hong Kong's Hang Seng and South Korea's Kospi each gave up 0.2%. China's Shanghai Composite bucked the downbeat trend, however, adding 0.05%.

Stocks in Europe are in the black ahead of tomorrow's European Central Bank (ECB) policy-setting meeting, as energy and tech stocks trade higher. Germany's DAX is up 0.3%, despite data showing July's industrial output fell by 1.5% -- its largest monthly drop in roughly two years. London's FTSE 100 is nearly 0.1% higher, as Bank of England (BoE) Governor Mark Carney prepares to answer lawmakers' questions over the central bank's post-Brexit stimulus measures. Rounding out the region, France's CAC 40 has added 0.2%.

overseas stocks september 7

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Published on Sep 7, 2016 at 9:15 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Upgrades
Analysts are weighing in on construction equipment maker Caterpillar Inc. (NYSE:CAT), data storage specialist Seagate Technology PLC (NASDAQ:STX), and social media stock Facebook Inc (NASDAQ:FB). Here's a quick roundup of today's bullish brokerage notes on CAT, STX, and FB.

  • CAT is up 0.1% in pre-market trading, after Deutsche Bank began coverage on the blue-chip stock with an upbeat "buy" rating and a $98 price target -- a 19.4% premium over Tuesday's close at $82.08, and in territory not seen since late 2014. More recently, Caterpillar Inc. hit an annual high of $84.73 in mid-August, and the shares have been enjoying support from their 50-day moving average for more than two months. Plus, the Dow component could get an extra boost, should more brokerage firms follow Deutsche Bank's bullish lead. Specifically, just one of the 13 analysts following CAT rates the stock a "buy," and the average 12-month price target sits well underfoot, at $73.94. That means CAT could be a prime target for more positive analyst attention in the near future.
  • A price-target hike to $50 from $37 at Craig-Hallum has STX 3.4% higher ahead of the open. The shares have been climbing steadily since their mid-July bull gap. In fact, Seagate Technology PLC has outperformed the S&P 500 Index (SPX) by nearly 45 percentage points over the past three months, closing Tuesday at $34.47. Still, near-term options traders have taken an unusually put-skewed approach toward the stock, per its Schaeffer's put/call open interest ratio (SOIR) of 1.20. This ratio not only shows puts outnumber calls among options set to expire in three months or less, but it ranks higher than 79% of the past year's readings. An unwinding of skepticism as the shares continue to outperform could send STX even higher.
  • FB is up 0.4% ahead of the bell, after Morgan Stanley increased its price target on the stock to $160. The equity hit an all-time high of $129.94 on Tuesday before closing at $129.73, but with a 14-day Relative Strength Index (RSI) of 74 -- in overbought territory -- the shares could be overdue for a breather. Plus, open interest levels are near a call-heavy extreme among options expiring in the next three months. Facebook Inc's SOIR of 0.57 -- showing calls nearly doubling puts -- sits just 3 percentage points from an annual low. A capitulation among the weaker bullish hands on any sign of technical weakness could result in headwinds.
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Published on Sep 7, 2016 at 9:21 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

U.S. futures are pointed slightly lower, as stocks seem to be taking their cues from oil once again. Among specific equities in focus are burrito chain Chipotle Mexican Grill, Inc. (NYSE:CMG), automaker Ford Motor Company (NYSE:F), and data storage stock Western Digital Corp (NASDAQ:WDC).

  • CMG is sizzling in electronic trading, after Bill Ackman's Pershing Square Capital Management revealed it has taken a nearly 10% stake in the restaurant operator. More generally speaking, the stock has been punished by a rash of food-safety issues since topping out last October at $757, settling yesterday at $414.07. However, ahead of the open, Chipotle Mexican Grill, Inc. is pointed 5.8% higher. Short sellers could get burned, if these gains materialize. A lofty 17.3% of CMG's float is sold short, translating to over six sessions' worth of trading, at the stock's average daily trading level.
  • F stock is up 0.4% pre-market, after the automaker posted its best-ever August sales total in China, rising 22% year-over-year. Positive fundamental developments have been hard for Ford Motor Company to find lately, triggering heavy bearish betting in the options pits. For example, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio rests at an annual high of 2.25. This heavy skepticism is understandable, given Ford's 10% year-to-date deficit at $12.67.
  • WDC boosted its full-year outlook, setting up its shares to rally out of the gate. Yet, from a long-term perspective, things have been ugly for the tech stock. Year-over-year, Western Digital Corp has lost 43.3% of its value, leaving it potentially vulnerable to downgrades. Despite the stock's underperformance, two-thirds of covering analysts rate the shares a "buy" or better. If the brokerage crowd begins to throw in the towel on WDC, selling pressure could be exacerbated.

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Published on Sep 7, 2016 at 10:03 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Downgrades
Analysts are weighing in on gold stocks Barrick Gold Corporation (USA) (NYSE:ABX), Kinross Gold Corporation (USA) (NYSE:KGC), and Yamana Gold Inc. (USA) (NYSE:AUY). Here's a quick roundup of today's bearish brokerage notes on ABX, KGC, and AUY.

  • Berenberg initiated coverage on a handful of gold stocks today. For ABX, this resulted in a "sell" rating and $15.20 price target -- a 19% discount to the stock's current level of $18.83, off 1.1% this morning. This move is rather surprising, considering Barrick Gold Corporation has added an astounding 155% year-to-date. Plus, the stock's most recent pullback found a familiar area of support at the $17 level, after last Friday's nonfarm payrolls report gave gold stocks a big boost. However, it echoes the majority, considering only three out of 14 analysts currently rate the stock better than a "hold." Should the stock resume its uptrend, a round of well-deserved upgrades could translate into fresh tailwinds.

  • KGC was given a "hold" rating at Berenberg, which set its price target on the stock at $4.60 -- essentially in line with the equity's current price at $4.59. Credit Suisse also weighed in on KGC, cutting its target price to $5.75 from $6.00. The equity has followed suit with many sector peers in turning in an outstanding year so far, up more than 150%. And near-term options traders have taken a distinctly call-skewed approach, per Kinross Gold Corporation's Schaeffer's put/call open interest ratio (SOIR) of 0.31. This reading shows that calls outnumber puts more than 3-to-1 among options expiring within the next three months, and sits lower than 87% of comparable readings taken in the past year.
  • AUY received a price-target cut to $6.25 from $6.50 -- still in two-year-high territory -- at Credit Suisse. The shares have added roughly 20% so far in September alone, even with today's 0.9% at $4.85. Analysts, meanwhile, have taken an upbeat outlook toward AUY. Nearly two-thirds of the brokerage firms tracking Yamana Gold Inc. give the stock a "buy" or better rating. Options traders have been optimistic, as well. At the ISE, CBOE, and PHLX, the stock's 50-day call/put volume ratio sits at a top-heavy 12.63, meaning speculators have bought to open nearly 13 AUY calls for each put over the last 10 weeks. Moreover, this reading ranks in the high 87th percentile of its annual range.
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