Earnings Preview: The Home Depot, Inc., First Solar, Inc., and SunPower Corp

Analyzing recent option activity on Home Depot Inc (HD), First Solar, Inc. (FSLR), and SunPower Corporation (SPWR)

Feb 23, 2015 at 12:27 PM
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Among the stocks gearing up to report earnings tomorrow are blue-chip retailer Home Depot Inc (NYSE:HD), as well as solar energy concerns First Solar, Inc. (NASDAQ:FSLR) and SunPower Corporation (NASDAQ:SPWR). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on HD, FSLR, and SPWR.

  • HD, which will release fourth-quarter earnings tomorrow morning, has been on the rise, with the shares notching a fresh all-time high of $113.16 earlier today for a 7.8% year-to-date gain. However, puts have been popular in the stock's options pits, as Home Depot Inc's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.91 sits in the 69th percentile of its annual range. Traders anticipating a positive post-earnings reaction have history on their side -- in the session following its last eight earnings releases, HD has gained an average of 2.2%. Short-term speculators are paying historically fair prices for the stock's options, as its Schaeffer's Volatility Index (SVI) of 20% sits in the 53rd percentile of all similar readings taken over the past year.

  • Ahead of tomorrow night's earnings release, FSLR is up 11.3% year-to-date to perch at $49.63. In the options pits, First Solar, Inc.'s 10-day ISE/CBOE/PHLX call/put volume ratio of 4.46 ranks just 4 percentage points away from an annual high. Meanwhile, in the session following its last eight earnings reports, the shares of FSLR have experienced an average decline of 5.1%. Near-term options for the equity are currently available for slightly above-average prices, as its SVI of 59% sits in the 61st percentile of its annual range.

  • Sector peer SPWR has also been trending upwards, with the shares advancing 9.3% year-to-date to reach $28.22. Accordingly, call buying in the options pits is nearing fever pitch, with SunPower Corporation's 10-day ISE/CBOE/PHLX call/put volume ratio of 9.41 standing just 1 percentage point away from the highest such reading of the past year. Looking back, in the session following its last eight earnings reports, SPWR has lost an average of 3%. Traders are paying middling prices for their short-term bets on the stock, as its SVI of 58% sits in the 56th annual percentile.
 

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