Earnings Preview: CBS Corporation, Groupon, Inc., and Shire plc

Analyzing recent option activity on CBS Corporation (CBS), Groupon Inc (GRPN), and Shire PLC (ADR) (SHPG)

by Griffin Kruse

Published on Feb 11, 2015 at 3:46 PM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks gearing up to report earnings tomorrow are media giant CBS Corporation (NYSE:CBS), online coupon issue Groupon Inc (NASDAQ:GRPN), and biopharmaceutical firm Shire PLC (ADR) (NASDAQ:SHPG). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on CBS, GRPN, and SHPG.

  • CBS is down 0.2% this afternoon to $56.90, ahead of the release of its fourth-quarter earnings data tomorrow night. Looking back, the shares of CBS have been stair-stepping higher over the past few months, with the equity up 16.5% since hitting an annual low of $48.83 in October. Meanwhile, put buying has picked up steam, with CBS Corporation's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX put/call volume ratio of 1.02 ranking higher than 83% of all similar readings taken in the past year. Historically, in the session following its last eight earnings reports, CBS has notched an average gain of 1.4%. Speculators are paying fair prices for their short-term bets on the stock, per its 30-day at-the-money (ATM) implied volatility (IV) of 29.2%, which sits in the 53rd percentile of its annual range.

  • Despite broad-market headwinds, GRPN is up 1.9% to reach $7.56, ahead of tomorrow night's earnings report. From a longer-term perspective, Groupon Inc has been a technical laggard, with the shares down 30.5% over the last year. Accordingly, sentiment in the options pits is nearing a pessimistic peak, with GRPN's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.58 sitting just 3 percentage points away from the highest reading taken over the past year. If history is any indicator, traders hoping for a large post-earnings swing from the stock could be in luck -- in the session following its last eight earnings reports, GRPN has moved an average of 17.6%, including a 22% gain last October. Plus, a check of the stock's near-term, at-the-money straddle pricing implies traders are anticipating a 13.3% move. Short-term speculators are paying up for their bets on GRPN, as its 30-day ATM IV of 75.4% is higher than 90% of all similar readings from the past year.

  • Ahead of tomorrow morning's earnings release, SHPG is up about 1% to hit $218.35, adding to a roughly 2.7% year-to-date gain. Going back further, Shire PLC has gained a staggering 40% since mid-October, when the stock gapped lower to $156.25. Surprisingly, puts are the options of choice, with SHPG's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.20 ranking higher than three-fourths of all similar readings taken over the past year. However, the security has advanced in all but two of the sessions following its last eight earnings release, averaging a gain of roughly 1.1%. Short-term options on SHPG are available for historically average prices, as its 30-day ATM IV of 31.6% sits in the 55th percentile of its annual range.

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