Earnings Preview: 3D Systems Corporation, Monster Beverage Corporation, and Sears Holdings Corporation

Analyzing recent option activity on 3D Systems Corporation (DDD), Monster Beverage Corp (MNST), and Sears Holdings Corp (SHLD)

Feb 25, 2015 at 1:07 PM
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Among the stocks gearing up to report earnings tomorrow morning are 3-D printing specialist 3D Systems Corporation (NYSE:DDD), energy drink maker Monster Beverage Corp (NASDAQ:MNST), and retailer Sears Holdings Corp (NASDAQ:SHLD). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on DDD, MNST, and SHLD.

  • DDD, which will release its fourth-quarter earnings data tomorrow morning, has been in recovery mode, with the shares up 11.8% since hitting an annual low of $27 on Feb. 3 to land at $30.19. However, a significant portion of traders appear to be bearish on the equity, as 34.5% of 3D Systems Corporation's available float is sold short. What's more, it would take short sellers nearly 13 sessions to cover their bets, at average daily trading volumes. Meanwhile, in the session following its last eight earnings reports, DDD has moved an average of 6.5%, and enjoyed a single-session post-earnings gain of 5.1% in November. Traders are paying above-average prices for their near-term bets on the stock, as its Schaeffer's Volatility Index (SVI) of 60% sits in the 72nd percentile of all similar readings taken over the past year.

  • MNST, which notched a fresh all-time high of $126 earlier today, has been on a hot streak, with the shares up about 14.5% year-to-date. Surprisingly, puts are popular in the stock's options pits ahead of tomorrow night's fourth-quarter earnings release. Specifically, Monster Beverage Corp's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.46 sits just 10 percentage points away from an annual pessimistic peak. Traders hoping for a positive post-earnings reaction have history on their side; in the session following its last four earnings reports, MNST has advanced an average of about 5%, including a 7.9% gain this past November. Short-term speculators are paying slightly inexpensive prices for their bets on the stock, as its SVI of 34% sits in the 40th percentile of its annual range. At last check, MNST has erased its gains, down 0.6% at $124.11.

  • In the wake of unimpressive data from Sears Canada, SHLD is down 0.9% to $38.06, but remains 15.4% higher year-to-date. Sears Holdings Corp steps into the earnings confessional tomorrow morning, and sentiment in the options pits is bearish. Drilling down, SHLD's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.85 sits in the 82nd percentile of its annual range. Additionally, in the session following its last eight earnings reports, SHLD has lost an average of 3.8%, including a 4.4% drop in November. Premium on the equity's near-term options is running high, as its 30-day at-the-money implied volatility of 85.8% sits in the 85th percentile of all similar readings taken over the past year.

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