Earnings Preview: Adobe Systems Incorporated, DSW Inc., and Oracle Corporation

Analyzing recent option activity on Adobe Systems Incorporated (ADBE), DSW Inc. (DSW), and Oracle Corporation (ORCL)

Mar 16, 2015 at 1:37 PM
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Among the stocks gearing up to report earnings tomorrow night are software specialist Adobe Systems Incorporated (NASDAQ:ADBE), footwear retailer DSW Inc. (NYSE:DSW), and enterprise software firm Oracle Corporation (NYSE:ORCL). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on ADBE, DSW, and ORCL.

  • ADBE has been notching steady gains, with the shares up 7.4% year-to-date -- including a 0.6% gain today -- to reach $78.12. What's more, the equity achieved a fresh all-time high of $80.30 on Feb. 27. Accordingly, sentiment in the options pits has grown increasingly bullish, as Adobe Systems Incorporated's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.78 sits just 2 percentage points away from an annual high. Traders hoping for post-earnings upside have history on their side -- in the session immediately following its last eight earnings reports, ADBE has gained an average of 5.4%. Short-term options are available for relatively cheap prices, historically speaking, as ADBE's Schaeffer's Volatility Index (SVI) of 29% sits in the 37th percentile of its annual range. Adobe will report earnings after the close tomorrow.

  • On the other hand, DSW has struggled beneath resistance in the $38 region, with the shares down 0.9% today to hit $36.83, contributing to a 7.9% year-over-year loss. However, calls are prevalent ahead of tomorrow morning's fourth-quarter earnings release. Drilling down, DSW Inc.'s 50-day ISE/CBOE/PHLX call/put volume ratio of 27.42 reads higher than 99% of all similar readings taken over the past year. This bullish attention is somewhat surprising, given that DSW has lost an average of 4.7% in the session immediately following its last four earnings reports. Traders are paying relatively inexpensive prices for their near-term bets on the equity, as its SVI of 39% sits in the 37th percentile of its annual range.

  • RBC raised its price target on ORCL by $1 to $48, while underscoring a "sector perform" rating, sending the shares 1.6% higher today to reach $43.03. However, the shares of Oracle Corporation have been struggling recently, down 7.9% since notching an all-time high of $46.71 on Dec. 24. As such, sentiment in the options pits is bearish, as ORCL's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.23 sits in the 82nd percentile of its annual range. Meanwhile, in the session immediately following its last eight earnings reports, ORCL has lost an average of 1.5%, although the equity notched a 10.2% gain in December. Near-term options are available for fair prices, as its SVI of 27% sits in the 45th percentile of all similar annual readings.
 

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