Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on May 30, 2018 at 7:00 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Indicator of the Week

Copper is used to build almost anything, and oil is used to power almost anything. So, these commodities are often looked at as economic indicators. The chart below shows the typical yearly path of these commodities along with the S&P 500 Index (SPX). I also show this year's return. Despite oil's woes over the last few days, it's still up over 10% on the year, while copper is down a decent amount. This week, I'm looking at historical divergences in these assets to see if it's any kind of tell for stocks going forward.

copper_oil 2018 returns on may 29

History Points to Short-Term SPX Upside

Going back to 1980, I looked at copper and oil returns through a similar time each year. Then, based on whether these commodities were up or down, I looked at how the S&P 500 did for the rest of the year and over the next three months. If investors think bullish returns for these commodities are a positive sign for markets, then -- at least using this method -- they are wrong.

When both commodities were up at this point in the year, the S&P 500 has gained more than double digits, on average, for the rest of the year, with all five of the returns positive. When both oil and copper are down at this point, the index averages a gain of just 1.22%, the worst average return in the table. In the current situation, with copper down and oil up, the S&P 500 averages a respectable 6.22% return, with 71% of the returns positive. (Editor's note: A previous version of this sentence erroneously said "with copper up and oil down." We apologize for any confusion.)

The second table below does the same thing, but looks at a shorter three-month time frame. This table does not resemble the first table. The worst returns are when both commodities are negative. The good news is that the best returns have occurred in the current situation, with copper down and oil up on the year.

spx returns may 29

Oil's Big 2018 Lead Could Hamper SPX Returns, Though

This year, it's not just that copper is negative, and oil is positive. It's the extent to which they are different. Oil is outperforming copper by a lot. I broke down those 14 times that oil was up and copper was down by whether the difference in the return was more than 15%, or less than 15%.

In both tables below, it's worse for the market when the discrepancy is so wide. For the rest of the year, the S&P 500 averages a 3.63% return when there's a substantial difference, compared to an 8.81% return when the difference is smaller. Over the next three months -- which you see in the second table -- when there's a stark difference, the index averages a loss, with 57% of the returns positive. Otherwise, it averages a 5.32% gain, with 86% of the returns positive.

stock returns oil outperformance may 29

Published on May 30, 2018 at 12:39 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview

Retail stocks are bringing up the rear of earnings season, with Dick's Sporting Goods (DKS) coming in as the latest big winner. Tomorrow, discount retailers Dollar General Corp. (NYSE:DG) and Dollar Tree, Inc. (NASDAQ:DLTR) report first-quarter earnings before the open. Ahead of the event, both stocks are pricing in a larger-than-normal move. 

Record Highs On The Horizon For Dollar General Stock

Over the last eight quarters, Dollar General stock has closed higher in the session after the company reports earnings five times -- including the two most recent. On average, the shares have swung 5.9% the next day, regardless of direction. This time around, the options market is pricing in a bigger one-day move of 9.9%, based on implied volatility data.

A move of similar proportion Thursday would vault DG stock past its Jan. 29 record high of $105.82. The shares have gained 31% in the last 12-months to trade at $96.65, and their 160-day moving average has contained the last two pullbacks this year. 

Dollar General Chart YTD 160MA

In the options pits, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.12 is in the 94th percentile of its annual range, implying that short-term options traders have rarely been more put-biased during the past year. An unwinding of pessimism in the options pits could also be a tailwind for DG shares.

Dollar Tree Stock Vulnerable To Downgrades

DLTR stock dropped 14.5% in the session after earnings in March. However, the security has closed higher the day after earnings in six of the past eight quarters. For Thursday's trading, the options market is pricing in a 8.9% post-earnings move, more than the 6.8% swing the security has averaged over the last two years.

Another post-earnings dip of similar magnitude could send the stock to its lowest point since October. On the charts, DLTR has shed nearly 18% since touching a record high of $116.65 on Jan. 31 to trade at $96.29. Following the post-earnings bear gap in March, the shares have seen the $100 level serve as resistance. 

Daily DLTR Chart

Yesterday, Raymond James downgraded the security to "outperform" from "strong buy." Should DLTR struggle again post earnings, more bearish brokerage attention could follow. Of the 22 brokerages covering Dollar Tree, 16 rate it a "buy" or "strong buy," with not a single "sell" on the books. Furthermore, the equity's average 12-month price target of $111.88 sits well above the stock's current perch.

Published on May 30, 2018 at 1:53 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Quantitative Analysis
  • Technical Analysis

Shares of network equipment specialist Juniper Networks, Inc. (NASDAQ:JNPR) have underperformed over the past year, shedding 7.6% to trade at $27.09. And while the equity has been on the rise in recent weeks since bouncing near the $24 in mid-April, a closer look at the charts, and other data on JNPR, suggests now is certainly not the time to be speculating on another move higher from the stock.

First of all, the aforementioned near-term rally from the security put it in overbought territory, according to its 14-day Relative Strength Index (RSI). This indicator broke above the 70 mark, signaling overbought conditions, back on May 9 and it's held close to there since. Not only that, but the 320-day moving average -- one of our favorite moving averages -- has been acting as a ceiling, and this is occurring just below the late-January bear gap, hinting at a potentially formidable layer of technical resistance.

jnpr stock chart

If all that isn't bad enough, JNPR is heading into what's historically been a bearish time of year. In fact, data from Schaeffer's Senior Quantitative Analyst Rocky White shows it's been one of the worst S&P 500 stocks to own from June through August, averaging a loss of 6.6% over the past 10 years, closing the three-month period in positive territory just three times during that time.

Despite this, options traders have seemingly been quite bullish, with more than five calls bought to open for every put during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In a similar vein, Juniper Networks' Schaeffer's put/call open interest ratio (SOIR) is 0.21, which aside from showing call open interest among contracts expiring within three months heavily outweighs put open interest, sits as an annual low. As such, an unwinding of this unusual call-skew could be another headwind for the shares.

And it's not even like JNPR has been a good name for premium buyers to target. Specifically, the security's Schaeffer's Volatility Scorecard (SVS) is only 9 (out of a possible 100), meaning it's tended to fall short of options traders' volatility expectations over the past year.

Published on May 30, 2018 at 2:08 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Expectational Analysis
  • Earnings Preview

Wall Street has been hit with an onslaught of retail earnings in recent weeks. Today, traders are cheering strong results from sporting goods retailer Dick's Sporting Goods (DKS), while tomorrow, yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU) will step up to the plate. Ahead of the company's first-quarter earnings report -- due after Thursday's close -- LULU stock is trading up 0.8% at $106.52.

This upside is just more of the same for Lululemon, though, with the retail stock more than doubling in value on a year-over-year basis. More recently, the shares have surged nearly 36% since taking a sharp earnings-induced bounce off their 80-day moving average in late March, and hit a record high of $107.68 yesterday.

lulu stock daily chart may 30

LULU stock could be headed even higher by week's end, if history is any guide. Over the past eight quarters, the security has gained ground in the session subsequent to earnings six times, including the most recent one in March. On average, Lululemon shares have swung 11% the next day, regardless of direction. This time around, the options market is pricing in a slightly bigger move of 13.1% for Friday's trading.

Options traders, however, have been bracing for a move to the downside. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), LULU's 10-day put/call volume ratio of 1.03 ranks in the 76th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip in recent weeks.

While some of this is likely a result of shareholders initiating portfolio protection, there's plenty of skepticism priced into the stock outside of the options pits. For starters, 12 of the 25 analysts covering the shares maintain a lukewarm "hold" recommendation. Plus, the average 12-month LULU price target of $96.46 stands at a discount to current trading levels.

Elsewhere, short interest is up almost 27% since mid-February to 4.55 million shares. While this accounts for a low 4.3% of Lululemon stock's available float, it would still take almost three days to cover these bearish bets, at the equity's average pace of trading. Another positive earnings reaction for LULU could prompt a round of bullish brokerage notes and/or short covering, with could translate into bigger tailwinds for the retail shares.

Published on May 30, 2018 at 2:21 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Quantitative Analysis
  • Editor's Pick

Semiconductor stocks could buck the broader sluggish summer trend by making bigger-than-usual price swings, if recent history is any indicator. Schaeffer's Senior Quantitative Analyst Rocky White recently identified stocks that tend to be most volatile in the June-August period, looking at their standard deviation of returns over the past 10 years. On the list were chip stocks Micron Technology, Inc. (NASDAQ:MU), Nvidia Corporation (NASDAQ:NVDA), and Advanced Micro Devices, Inc. (NASDAQ:AMD).

MU Stock Explores Dot-Com-Boom Territory

Micron stock earlier today peaked at $64.66 -- territory not explored since 2000 -- before pulling back, and was last seen 1.1% lower at $61.96. MU shares have been on fire since the company last week announced a $10 billion stock buyback plan and upped its current-quarter earnings guidance. As such, the equity's 14-day Relative Strength Index (RSI) yesterday moved into overbought territory north of 70, suggesting today's breather may have been in the cards.

Micron stock chart may 30

However, Micron stock tends to slip in the summer months. Looking back 10 years, the equity has averaged a loss of 4.4% in June through August, and has been higher just 60% of the time.

And again, MU has been one of the most volatile S&P stocks, too -- fourth on our list overall. Echoing this, the security's Schaeffer's Volatility Scorecard (SVS) sits at 85 out of 100, indicating MU shares have handily exceeded options traders' volatility expectations in the past year. As such, short-term traders may want to consider a volatility-based options strategy like the straddle or strangle.

NVDA Has Exceeded Options Traders' Volatility Expectations

Nvidia stock touched a record high of $260.50 on May 10, following a blowout earnings report. Since then, NVDA shares have consolidated their gains in the $240-$250 region, and were last seen up 1% at $251.10. Still, the equity is up more than 11% in May -- set for its best month since January -- and has added more than 73% in the past year.

nvidia stock chart may 30

Over the past 10 years, NVDA has ended the June-August period higher 70% of the time. The equity's average return during this period is negative 0.48%, but that doesn't mean the stock will remain sideways this summer; as alluded to earlier, Nvidia stock is also on our list of stocks that tend to be volatile during this period. Further, the security's SVS sits at a lofty 90, underscoring NVDA's ability to make bigger moves on the charts than its options price in.

It should also be noted that NVDA's short-term options are attractively priced right now. The stock's Schaeffer's Volatility Index (SVI) of 32% sits in just the 10th percentile of its annual range, indicating relatively low volatility expectations are, in fact, being priced into near-term contracts.

AMD Stock Tends to Cool Off in the Summer

Advanced Micro Devices stock was last seen 2.7% higher at $13.72. The shares are 1.5% higher so far this week -- defying a recent history of slumping after Memorial Day. AMD stock is still staring up at familiar resistance in the $13.75-$14.50 area, however, which has stifled the equity's momentum for most of the past year. Plus, the stock's 14-day RSI is now in overbought territory, hinting that a short-term pullback could be on the horizon.

AMD stock chart may 30

On our list of most volatile summer stocks, however, AMD tends to fare the worst. The equity has averaged a June-August loss of 6.37%, looking back 10 years, and has ended the period in the black just 30% of the time.

Options traders looking to speculate on another summer slump for Advanced Micro Devices shares can pick up premiums at a relative discount. The security's SVI of 39% is higher than just 9% of all other readings from the past 12 months.

Published on May 30, 2018 at 3:03 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview

Makeup retailer Ulta Beauty Inc (NASDAQ:ULTA) is slated to report first-quarter earnings after the market closes tomorrow. The beauty stock has been moving mostly higher on the charts of late, and just this morning received a price-target hike from Buckingham Research to $300 from $270 -- territory not charted in almost a year. What's more, ULTA stock tends to outperform in the month of June.

Despite today's upbeat analyst attention, Ulta Beauty stock was 0.3% lower to trade at $253.01, at last check. From a longer-term perspective, the security has rallied 32% since its March lows, but recently stalled in the $255-$260 area.

Daily Chart of ULTA with Highlight

However, Ulta stock may break above that ceiling soon, if recent history is any indicator. For instance, data from Schaeffer's Senior Quantitative Analyst Rocky White shows that ULTA has been one of the best S&P 500 stocks to own in June. The beauty name has averaged a monthly gain of 3.91% over the past 10 years, closing in positive territory an impressive 70% of the time.

In terms of analyst attention, Buckingham Research is far from the only firm optimistic about ULTA's future. Of the 19 brokerage firms following the retail stock, 14 currently sport "buy" or "strong buy" ratings. However, more price-target hikes could be in store on an earnings beat. ULTA's average 12-month price target of $263.7 -- represents just a 4% premium to current levels.

Digging into its earnings history, ULTA stock has been higher 50% of the time after the company's last eight reports. Overall, the stock has averaged a one-day post-earnings swing of 5.7% over the past two years, regardless of direction. This time around, the options market is pricing in a much larger-than-usual 9.8% next-day move, per data from Trade-Alert.

As for options data, the security's Schaeffer's Volatility Scorecard (SVS) stands at 89 out of a possible 100. This high ranking shows that the shares have tended to make outsized moves over the past year, relative to what the options market had priced in -- a boon to potential premium buyers.

Published on May 31, 2018 at 12:26 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Technical Analysis
  • Quantitative Analysis

Oil stocks have grabbed headlines lately, amid swinging crude futures. And while this pair of blue-chip energy names are bucking historically bearish headwinds, these under-the-radar mid-cap stocks are worth keeping an eye on, too. In fact, both Oasis Petroleum Inc. (NYSE:OAS) and Nabors Industries Ltd. (NYSE:NBR) are throwing up potential "buy" signals, and have attractively priced options to boot.

Oasis Stock Hit a New High Earlier

Oasis Petroleum stock has been a steady climber since April, adding 60% so far this quarter and guided higher by its 20-day moving average. The stock hit an annual high of $13.39 earlier, but was last seen down 0.2% to trade at $13.02.

Daily Chart OAS

What's more, OAS' Schaeffer's Volatility Index (SVI) is docked at 52.6% -- in the 7th annual percentile, meaning premium on short-term contracts is relatively cheap at the moment, from a volatility perspective. According to Schaeffer's Senior Quantitative Analyst Rocky White, the one other time OAS has been trading near 52-week highs with its SVI ranked in the lower fifth of its annual range since 2008, the stock was up 23.71% one month later. Another rally of this magnitude would put Oasis shares back above $16 for the first time since January 2017.

Nabors Stock Pulls Back to Key Technical Trendline

Looking at Nabors Industries, the equity has been chopping higher since its mid-February lows, topping out at an 11-month peak of $8.87 on May 17. Since then, the oil stock has pulled back to its 80-day moving average. However, this could have bullish implications for the security based on previous signals.

Daily NBR Chart

In fact, over the past three years, there have been four occasions where NBR has come within one standard deviation of its 80-day moving average after an extended stint above this trendline, according to White. One month later, the security averaged a return of 8.87%.

Those wanting to bet on more upside for the oil stock can pick up near-term options at a relative bargain. The equity's SVI of 50% ranks in the 13th percentile of its annual range, indicating premium on short-term contracts is pricing in low volatility expectations at the moment.

Published on May 31, 2018 at 3:22 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview

Clothing retailer Abercrombie & Fitch Co. (NYSE:ANF) is slated to report first-quarter earnings before the market opens tomorrow. Abercrombie stock is down 7.1% at $23.91 at last check, pressured by a post-earnings drop for sector peer American Eagle Outfitters (AEO). However, ANF shares have a history of positive earnings reactions, which could help send the retail stock on its next leg higher.

In fact, ANF stock has closed higher in the session following each of the company's last five reports, averaging a gain of 15.2%. Widening the scope, the stock has averaged a one-day post-earnings swing of 15.7% over the past two years, regardless of direction, in line with what the options market is pricing this time around, per data from Trade-Alert.

Another post-earnings move to the upside could have analysts re-evaluating their ratings on the equity. Fourteen firms currently follow ANF, 11 of which maintain a "hold" or "strong sell" rating -- leaving the door wide open for more upgrades. Further, the stock's average 12-month price target of $22.54 stands at a more than 5% discount to present trading levels.

The retail stock is heavily shorted, too, with the 14.6 million shares sold short representing nearly 22% of the available float. At ANF's average daily trading volume, it would take more than a week for shorts to cover their bearish bets -- meaning there's ample fuel for a short-squeeze rally.

Taking a closer look at ANF's technical backdrop, the clothing stock has been on a tear over the past 12 months, gaining 81%, and touching a two-year high of $29.20 on April 13. More recently, the security has been consolidating near the $24 region, home to its March highs.

Daily Chart of ANF Since May 17

Published on Jun 1, 2018 at 11:41 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Best and Worst Stocks

Shares of Wynn Resorts, Limited (NASDAQ:WYNN) are trading down 2% at $191.91, after Macau gambling revenue came in lower than expected in May. This could mark the start in a shifting trend for WYNN stock, if history is any guide.

In fact, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, Wynn Resorts has been one of the worst stocks to own in June on the S&P 500 Index (SPX), looking back over the past 10 years. The shares have averaged a June loss of 4.67%, and has finished the month in positive territory just twice.

Longer term, WYNN stock has put in a strong performance -- up 44% year-over-year. More recently, the shares have been in a channel of higher lows since taking a sharp bounce off their 120-day moving average in early March, and are trading not far from their Jan. 25 record high of $203.63. Plus, the security's 40-day moving average is cushioning today's blow.

wynn stock chart on june 1

Against this backdrop, there's plenty of optimism priced into the casino stock. Of the 13 analysts covering the shares, eight maintain a "strong buy" rating, with not a single "sell" on the books. Plus, the security's 12-month price target of $213.50 stands at a healthy 11% premium to current trading levels.

Elsewhere, short interest declined nearly 18% in the most recent reporting period to 3.09 million shares -- matching mid-February's multi-year low. These bearish bets account for just 3.9% of WYNN's available float, and it wouldn't even take two days to cover, at the average pace of trading. Should the shares take another June swoon, a shift in sentiment could create even bigger headwinds.

Regardless of which direction options traders are betting on WYNN stock to go over the next several weeks, it's an attractive time to buy premium. The security's Schaeffer's Volatility Index (SVI) of 28% ranks in the 19th annual percentile, meaning short-term options are pricing in relatively low volatility expectations at the moment.

Published on Jun 1, 2018 at 1:15 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Best and Worst Stocks
  • Editor's Pick

The shares of Netflix, Inc. (NASDAQ:NFLX) -- a company now worth more than blue chip Walt Disney (DIS) -- notched an all-time high of $358.63 earlier today, and were last seen 1.7% higher at $357.62. What's more, the FAANG stock could extend its run higher over the next few months, if recent history is any indicator.

Last week, Netflix stock powered through congestion in the $330-$340 area, after the streaming media giant announced a production deal with former President and First Lady Barack and Michelle Obama. Since then, NFLX has consolidated its gains atop the $350 level, and today's breakout has the security sitting on a year-to-date gain of more than 86%.

NFLX stock chart june 1

Plus, while the rest of the stock market tends to be sluggish in the month of June, NFLX has been one of the best S&P 500 members to own in the summer months. Specifically, the FAANG stock has averaged a June-August gain of 7.71%, looking back 10 years, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Further, Netflix shares have ended this stretch higher 70% of the time. A similar 7.71% rally from current levels would put NFLX around $385.20 by the end of August.

Despite the equity's unrelenting quest for all-time highs, several analysts remain unconvinced. Netflix stock sports just 21 "buy" or better endorsements, compared to 13 "hold" or worse ratings. This leaves the door wide open for analyst upgrades to lure more buyers to the table. Likewise, the average 12-month price target of $334.95 represents a discount to NFLX's current price, setting the scene for possible price-target hikes.

Speculators looking to play the FAANG stock's short-term trajectory can pick up options at a relative discount, too. The security's Schaeffer's Volatility Index (SVI) of 27% is higher than just 7% of all other readings from the past year, suggesting near-term options are pricing in relatively low volatility expectations right now. Further, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 94 out of 100, meaning NFLX has handily exceeded options traders' volatility expectations during the past year.

Published on Jun 1, 2018 at 1:24 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview

Cybersecurity concern Palo Alto Networks Inc (NYSE:PANW) is slated to report its fiscal third-quarter earnings after market close on Monday, June 4. Palo Alto Networks stock is down 0.2% at $207.70 at last check, despite a round of bullish analyst notes yesterday. Regardless, PANW shares have a history of positive earnings reactions, and below we will take a look at what the options market is pricing in for the stock's post-earnings move.

Digging into earnings history, PANW has closed higher in the session following each of the company's last four reports, including a 17.2% jump this time last year. Widening the scope, the stock has averaged a one-day post-earnings swing of 11.5% over the past two years, regardless of direction. However, the options market is pricing in a smaller-than-usual 9.5% move this time around, per data from Trade-Alert.

The stock has been an outperformer in 2018, just yesterday surging to a fresh record high of $211.69, while gaining over 43% year-to-date. What's more, the stock has seen healthy support from the rising 30-day moving average since mid-February. And though the options market is pricing in a smaller-than-average post-earnings move for the stock, a lift of that magnitude would put Palo Alto's share price at $227.50.

Daily Chart of PANW with 30MA

Analyst attention has been overwhelmingly optimistic on Palo Alto stock. Of the 33 analysts covering the online concern, 30 sport "buy" or "strong buy" recommendations. At the same time, PANW's average 12-month price target of $210.72 prices in almost no upside from current levels. As such, yesterday's round of price-target hikes (Raymond James led the way with a hike to $240) could indicate a future trend, as more analysts rush to raise their outlooks on the outperformer.

Sentiment has not been quite so optimistic in the options pits, however. PANW's Schaeffer's put/call open interest ratio (SOIR) of 1.06 ranks higher than 84% of all comparable readings taken in the past year. In simpler terms, this means options traders are more put-heavy than usual among contracts set to expire in three months or less.

Published on Jun 1, 2018 at 2:22 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Best and Worst Stocks
  • Expectational Analysis

Bank stocks are trading higher today, after this morning's strong jobs report strengthens the case for a June rate hike from the Federal Reserve. The market is currently pricing in a 91.3% chance the Federal Open Market Committee (FOMC) will raise its key interest rate at the June 12-13 policy-setting meeting. Ahead of the event, shares of Discover Financial Services (NYSE:DFS) are up 0.7% at $74.38 -- and it could be a good time to buy the stock, if history is any guide.

According to Schaeffer's Senior Quantitative Analyst Rocky White, DFS has been one of the best stocks to own on the S&P 500 Index (SPX) over the June-August period, looking back the past 10 years. On average, the shares have gained 7.35% over the three-month period, and have ended in positive territory 70% of the time.

While the shares have added roughly 25% on a year-over-year basis, their more recent price action has been choppy. After topping out north of $81 in late March -- a chip-shot from their late-January record high of $81.93 -- DFS stock pulled back to familiar support at its 200-day moving average, and is now trading between a 38.2% and 50% retracement of its May rally. Another 7.35% June surge would put the security back near $80.

dfs daily price chart june 1

There's plenty of skepticism to be unwound on DFS stock, too, which could help fuel a June rally. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 3.07 ranks in the 89th annual percentile, meaning puts have been bought to open at a quicker-than-usual clip -- albeit amid relatively low absolute volume.

Elsewhere, short interest surged nearly 23% in the most recent reporting period to 4.86 million shares -- the most since early March. A capitulation from some of the weaker bearish hands could keep the wind at DFS stock's back. A round of upgrades could draw more buyers to the bank stock's table as well, considering eight of the 19 analysts covering the shares maintain a "hold" recommendation.

Now appears to be a prime time to buy call options on DFS stock. For starters, the equity's Schaeffer's Volatility Index (SVI) of 22% ranks in the 26th annual percentile, indicating premium on short-term options is relatively cheap, from a volatility perspective. What's more, the equity's 30-day implied volatility skew of 21.4% ranks higher than 89% of similar readings taken in the past year, suggesting calls are pricing in lower volatility expectations than their put counterparts.

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