Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Feb 19, 2021 at 10:33 AM
  • Buzz Stocks
So far today, 33,000 calls and 26,000 puts have crossed the tape -- three times what is typically seen at this point. The February 500 call is the most popular, followed by 470  call in the same monthly series, with new positions being opened at the latter. In other words, investors expect more upside for ROKU by the end of the day, when contract expires.
Published on Feb 19, 2021 at 9:51 AM
Updated on Feb 19, 2021 at 10:02 AM
  • Buzz Stocks

What to Do With Dropbox Stock After Earnings

by Schaeffer's Digital Content Team
 
Published on Feb 19, 2021 at 9:59 AM
  • Buzz Stocks

The shares of Kraft Heinz Co (NASDAQ:KHC) are down 2.1% at $38.15 this morning, after J.P. Morgan Securities downgraded the packaged foods producer to "neutral" from "overweight." The analyst said it has no valuation rationale to recommend the stock, and while it sees some additional upside for KHC, it's not enough for the previous "overweight" rating. 

This blow has KHC tumbling from a two year high of $39.22, touched during yesterday's session. The equity has been chopping higher since last March's plummet, and just recently pushed past pressure at the $36 region, with help from the 200-day moving average. Year-over-year, KHC is up roughly 40%. 

Coming into today, analysts were split on the equity, with six carrying "strong buy" rating, and four saying "hold." Meanwhile, the 12-month consensus price target of $37.44 is a 2% discount to last night's close. 

Option traders, meanwhile, have been incredibly bullish. At the Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 9.23 calls have been picked up for every put over the last 10 weeks. This ratio stands higher than 93% of readings from the past year, suggesting a healthier-than-usual appetite for long calls of late. 

Published on Feb 19, 2021 at 7:33 AM
  • Buzz Stocks

Today's Stock Market News & Events: 2/19/2021

by Schaeffer's Digital Content Team

Today will feature the Markit manufacturing PMI, Markit services PMI, and existing home sales. 

The following companies are slated to release quarterly earnings reports today, February 19:

Balchem Corp. (NASDAQ:BCPC -- $115.31) develops, manufactures, and markets specialty performance ingredients and products. Balchem will report its fourth-quarter earnings of 2020 before the bell today.

Barnes Group Inc. (NYSE:B -- $51.83) provides engineered products, industrial technologies, and innovative solutions. Barnes Group will report its fourth-quarter earnings of 2020 before the bell today.

Deere & Co. (NYSE:DE -- $300.25) manufactures and distributes various equipment. Deere will report its fourth-quarter earnings of 2020 before the bell today.

DTE Energy Co. (NYSE:DTE -- $120.00) engages in the utility operations. DTE Energy will report its fourth-quarter earnings of 2020 before the bell today.

Essent Group Ltd. (NYSE:ESNT -- $43.38) provides private mortgage insurance and reinsurance for mortgages. Essent Group will report its fourth-quarter earnings of 2020 before the bell today.

Frontline Ltd. (NYSE:FRO -- $7.21) engages in the seaborne transportation of crude oil and oil products. Frontline will report its fourth-quarter earnings of 2020 before the bell today.

HMS Holdings Corp. (NASDAQ:HMSY -- $36.76) provides cost containment solutions in the United States healthcare marketplace. HMS Holdings will report its fourth-quarter earnings of 2020 before the bell today.

ITT Inc. (NYSE:ITT -- $76.86) manufactures and sells engineered critical components and customized technology solutions. ITT will report its fourth-quarter earnings of 2020 before the bell today.

Magna International Inc. (NYSE:MGA -- $75.45) designs, engineers, and manufactures components, assemblies, systems, subsystems, and modules for original equipment manufacturers (OEMs) of vehicles and light trucks. Magna will report its third-quarter earnings of 2021 before the bell today.

Portland Gen Electric Co. (NYSE:POR -- $41.86) is a vertically integrated electric utility company. Portland Gen Electric will report its fourth-quarter earnings of 2020 before the bell today.

Shell Midstream Partners L.P. (NYSE:SHLX -- $11.30) owns, operates, develops, and acquires pipelines and other midstream assets. Shell Midstream Partners will report its fourth-quarter earnings of 2020 before the bell today.

Spirit Realty Capital Inc. (NYSE:SRC -- $40.95) is a real-estate investment trust. Shell Midstream Partners will report its fourth-quarter earnings of 2020 before the bell today.

bluebird bio Inc. (NASDAQ:BLUE -- $26.95) is a clinical-stage biotechnology company. bluebird bio will report its fourth-quarter earnings of 2020 after the market closes today.

KBR Inc. (NYSE:KBR -- $31.75) provides professional services and technologies across the asset and program life-cycle. KBR will report its fourth-quarter earnings of 2020 after the market closes today.

Looking ahead to next week, the last week of February will start out slow, but plenty of economic data will be featured by the end, including the U.S. Federal Budget. The consumer side of things will be highlighted throughout the week, with both consumer confidence and consumer spending scheduled for release. Earnings season will continue as well. The list of upcoming reports includes Best Buy (BBY), Bilibili (BILI), Etsy (ETSY), First Solar (FSLR), Foot Locker (FL), Home Depot (HD), Lowe's (LOW), Salesforce.com (CRM), and Square (SQ). All economic dates listed here are tentative and subject to change.

Published on Feb 18, 2021 at 5:32 PM
  • The Week Ahead

The last week of February will start out slow, but plenty of economic data will be featured by the end, including the U.S. Federal Budget. The consumer side of things will be highlighted throughout the week, with both consumer confidence and consumer spending scheduled for release. Earnings season will continue as well. The list of upcoming reports includes Best Buy (BBY), Bilibili (BILI), Etsy (ETSY), First Solar (FSLR), Foot Locker (FL), Home Depot (HD), Lowe's (LOW), Salesforce.com (CRM), and Square (SQ). 

Below is a list of key market events scheduled for the upcoming week. All economic dates listed below are tentative and subject to change.

Monday, Feb. 22, will bring leading economic indicators. 

Tuesday, Feb. 23, the FHFA home price index and the consumer confidence index are slated for release.

Wednesday, Feb. 24, new home sales data is on tap.

Thursday, Feb. 25, initial and continuing jobless claims are due out, along with durable goods orders, gross domestic product (GDP), and pending home sales. 

To end the week, Friday, Feb. 26 will feature the PCE price index, personal income and consumer spending data, retail inventories ex auto, the Chicago PMI, the Michigan consumer sentiment index, and the U.S. Federal Budget. 

Published on Feb 18, 2021 at 2:44 PM
Updated on Feb 18, 2021 at 4:05 PM
  • Most Active Options Update
  • Intraday Option Activity
This preference for bullish bets is being echoed in today's trading. So far, 945,000 calls have crossed the tape, compared to 381,000 puts. 
Published on Feb 18, 2021 at 2:21 PM
  • Buzz Stocks
 
Published on Feb 18, 2021 at 11:16 AM
  • Analyst Update
So far, 31,000 calls and 27,000 puts have crossed the tape so far. The February 85 put is the most popular, followed by the weekly 2/26 85-strike put, with new positions being opened at the latter. 
Published on Feb 18, 2021 at 11:01 AM
  • Editor's Pick
  • Strategies and Concepts

With all the recent market volatility, new and experienced traders alike are looking for the perfect strategy to get ahead in the game. We think a return to the basics could help everyone looking to gain a little more knowledge when it comes to options trading. This week, we'll dive into the difference between the straddle and the strangle, and hopefully open some eyes to the benefits of both plays.  

The Straddle Method

First up is the straddle. The straddle is a two-legged options trading strategy that's designed to capitalize on high volatility. To construct a straddle, the trader buys to open a call and a put on the same stock, with the same strike price and expiration date. Essentially, the speculator has initiated simultaneous bullish and bearish trades, allowing the straddle to return a profit no matter which direction the underlying stock moves.

So, why isn't it a good idea to play a straddle on every stock, every time, just to guarantee a winning trade? Because two options are purchased instead of one, the breakeven point on a straddle is significantly higher (or lower, on the put side) than with a single-option strategy. As a result, the equity needs to make a major directional move to offset the higher cost of entry -- a modest uptick or pullback isn't going to cut it.

Plus, if the stock moves sideways through expiration, the straddle buyer may incur a nearly 100% loss on both options, whereas a straightforward call or put buyer would be out the cost of only one option. While they're not ideal for every trading scenario, straddles can be a very profitable strategy when the underlying stock is expected to experience a significant rise in volatility during the time frame of the trade.

The Strangle Method

Next, the strangle is a very close cousin to the straddle, as it consists of simultaneous bullish and bearish trades on the same underlying stock. The idea is to profit from a big directional move, regardless of whether the stock rallies or plummets. As with a straddle, the strangle trader buys to open a call and a put on the same stock, with both options sharing the same expiration date.

However, unlike a straddle, the strangle involves a call and a put at two different strike prices. Most frequently, both strikes will be out of the money, surrounding the current stock price. By implementing this bullish volatility play with out-of-the-money options, the strangle trader can frequently obtain a lower cost of entry than the straddle player. On the other hand, this also means the strangle trader needs a relatively bigger move out of the underlying stock just to reach breakeven.

Due to these features, the strangle is best-suited only to those situations where the underlying stock seems likely to make a major directional move. Otherwise, the trader risks taking a 100% loss on both of his purchased options.

 

Published on Feb 18, 2021 at 10:41 AM
Updated on Feb 18, 2021 at 10:45 AM
  • Buzz Stocks
 
Published on Feb 18, 2021 at 9:57 AM
Updated on Feb 18, 2021 at 9:57 AM
  • Earnings Preview

Deere Stock is Red-Hot as Earnings Loom

by Schaeffer's Digital Content Team
 
Published on Feb 18, 2021 at 9:57 AM
  • Buzz Stocks

The shares of Walmart Inc (NYSE:WMT) are plummeting after the big box retailer posted fourth-quarter earnings and revenue that missed analysts' estimates. Walmart also released weak guidance for fiscal 2022, as it expects sales to quiet down after last year's surge in demand. At last glance, WMT is down 5.4% to trade at $147.20. 

Since hitting a record peak of $153.66 on Dec. 1 of last year, the shares have been chopping lower, slipping back below the year-to-date breakeven during this morning's session. It looks like its last few rally attempts were thwarted by the $147.50 level, though it looks like the 160-day moving average, which captured an early February pullback, could move in as potential support once again. 

Analysts haven't had much to say about WMT's turn in the earnings confessional this morning, though coming into today, the brokerage bunch was mostly optimistic. Of the 23 in coverage, 18 consider it a "buy" or better. What's more, the 12-month consensus price target of $162.75 is a 16.8% premium to last night's close. 

Option traders, meanwhile, were a bit more bearish than usual ahead of the event. While call volume still outpaced put volume, the equity's 50-day put/call volume ratio stood higher than 75% of readings from the past year. This means puts are being picked up at a quicker-than-usual clip. 

Today's trading leans bullish, though. Already, 163,000 calls and 63,000 puts have crossed the tape -- double what's typically seen at this point. The two most popular positions are the February 145 and 150 calls, which expire tomorrow. 

 

 

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