Earnings Preview: Urban Outfitters, Inc., Barnes & Noble, Inc., and VeriFone Systems, Inc.

Analyzing recent option activity on Urban Outfitters, Inc. (URBN), Barnes & Noble, Inc. (BKS), and VeriFone Systems Inc (PAY)

Mar 9, 2015 at 12:57 PM
facebook twitter linkedin

Among the stocks gearing up to report earnings are specialty retailer Urban Outfitters, Inc. (NASDAQ:URBN), book behemoth Barnes & Noble, Inc. (NYSE:BKS), and electronic payment specialist VeriFone Systems Inc (NYSE:PAY). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on URBN, BKS, and PAY.

  • URBN, which is set to release its fourth-quarter earnings data tonight, has been trending upwards, with the shares up 40% since hitting a two-year low of $27.89 on Nov. 18. At last look, the stock is 0.6% higher at $39.13, with help from a price-target hike to $46 from $42 at Brean Capital (which also reiterated a "buy" rating). Sentiment in the options pits is call-heavy, as Urban Outfitters, Inc.'s 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 3.79 sits in the 80th percentile of its annual range. The stock's historical earnings reactions haven't been much to write home about, though. In the session immediately following its last four earnings reports, URBN has shed an average of 3.8%, including a 6.6% drop to the aforementioned lows in November. Traders are paying relatively expensive prices for their short-term bets on URBN, as its Schaeffer's Volatility Index (SVI) of 44% sits in the 80th percentile of all similar readings taken over the past year.

  • Over the past 12 months, BKS has been an outperformer, with the shares up 14.9% year-over-year to hit $24.67. Off the charts, the company announced today that is investing in study material business Flashnotes Inc. in an attempt to expand its college bookstore business. Calls are popular in Barnes & Noble, Inc.'s options pits ahead of tomorrow morning's fiscal third-quarter earnings release. Drilling down, BKS's 10-day ISE/CBOE/PHLX call/put volume ratio of 17.81 sits just 6 percentage points away from an annual high. Meanwhile, in the session immediately following its last four earnings reports, BKS has gained an average of 1.8%. Traders are paying historically fair prices for their short-term bets on the equity, as its SVI of 53% sits in the 55th percentile of all similar readings taken over the past year.

  • On the other hand, PAY has been sliding, with the shares down 11% since hitting a two-year high of $38.63 on Dec. 23, to trade at $34.38. Not surprisingly, sentiment has grown increasingly bearish in VeriFone Systems Inc's options pits, as its 10-day ISE/CBOE/PHLX put/call volume ratio of 0.23 sits in the 80th percentile of its annual range. However, in the session immediately following its last four earnings reports, PAY has added an average of 6.3%, with the equity failing to have a negative post-earnings reaction since December 2013. Near-term options on PAY are available for middling prices, as its SVI of 50% sits in the 56th percentile of its annual range. PAY will release its fiscal first-quarter earnings data tomorrow night.

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Common mistakes options traders make


Special Offers from Schaeffer's Trading Partners