Call Buyers Digest Post-Earnings Uptick at Rite Aid

Rite Aid Corporation (RAD) topped quarterly earnings expectations this morning

Apr 8, 2015 at 10:19 AM
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Rite Aid Corporation (NYSE:RAD) calls have been in high demand in the months leading up to this morning's earnings report. During the past 50 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than 12 calls for every put. The resultant call/put volume ratio of 12.08 rests just 6 percentage points from an annual bullish high.

Echoing this, open interest among RAD options expiring in the next three months is extremely call-skewed. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.25 indicates short-term call open interest outweighs put open interest by a 4-to-1 margin. What's more, this SOIR is lower than 93% of comparable readings from the past year.

Short-term RAD options aren't cheap, though -- likely related to the uncertainty heading into this morning's big event. Specifically, the stock's Schaeffer's Volatility Index (SVI) of 0.83 ranks in the 98th percentile of its annual range, indicating front-month contracts are much more expensive than usual.

However, those hoping for a big post-earnings move are likely disappointed this morning. Despite posting better-than-expected earnings, Rite Aid Corporation (NYSE:RAD) is just 0.5% higher at $8.73. Longer term, though, the stock has been impressive -- advancing more than 16% year-to-date.


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