Earnings Preview: Advanced Micro Devices, Inc., General Electric Company, and Seagate Technology plc

Analyzing recent option activity on Advanced Micro Devices, Inc. (AMD), General Electric Company (GE), and Seagate Technology PLC (STX)

by Griffin Kruse

Published on Apr 16, 2015 at 1:47 PM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks gearing up to report earnings are chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD), blue chip General Electric Company (NYSE:GE), and data storage provider Seagate Technology PLC (NASDAQ:STX). Below, we'll gauge the pre-earnings temperature of AMD, GE, and STX.

  • AMD has spent the past month range-bound, with the shares fluctuating between support near $2.60 and resistance in the $2.80 neighborhood. Today, the shares are 4.3% higher to linger near $2.82 ahead of tonight's trip to the earnings confessional. Heading into today's session, traders have been betting bearishly on Advanced Micro Devices, Inc., as its 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.86 reads in the 94th percentile of its annual range. Additionally, short interest increased by nearly 11% over the last reporting period, and now accounts for 16.3% of AMD's available float. Traders banking on post-earnings downside for the stock have history on their side -- in the session immediately following its last eight earnings reports, AMD has shed an average of 4.1%, including a 16.2% plummet in July. Speculators are paying relatively attractive prices for their short-term bets on AMD, as its Schaeffer's Volatility Index (SVI) of 64% is higher than 42% of all equivalent readings from the past year.

  • On the other hand, GE has been trending upwards, with the shares up 8.1% year-to-date to hit $27.32. The stock's 2015 lead is thanks to an April 10 bull gap to six-year highs, after the firm announced it will sell the bulk of its real estate division to Blackstone Group LP (NYSE:BX) while initiating a $50 billion share repurchase program. Accordingly, options traders have been picking up GE calls over puts at a rapid-fire clip ahead of tomorrow morning's earnings release, as General Electric Company's 10-day ISE/CBOE/PHLX call/put volume ratio of 4.24 sits in the 79th percentile of its annual range. What's more, GE's Schaeffer's put/call open interest ratio (SOIR) of 0.53 is the lowest such reading taken over the past year, showing that short-term traders have never been this call-skewed on the stock. Meanwhile, in the session immediately following its last eight earnings reports, GE has gained an average of 0.8%. Near-term options on the equity are available for historically fair prices, as its SVI of 19% ranks in the 49th percentile of its annual range.

  • J.P. Morgan Securities initiated coverage on STX this morning with a "neutral" rating and a price target of $57 -- just a stone's throw from the stock's current perch of $55.85. Technically speaking, the shares of Seagate Technology PLC are down 1.4% ahead of earnings tomorrow morning, and have fallen 19.5% from their Dec. 23 all-time high of $69.40. In light of this negative price action, puts have been prominent in the options pits, as STX's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.76 ranks higher than 76% of all similar readings from the last 12 months. Elsewhere, in the session immediately following its last eight earnings reports, STX has lost an average of 2.4%, with just two of those sessions yielding positive outcomes. Near-term options on the security are available for historically middling prices, as its SVI of 33% ranks in the 53rd percentile of its annual range.

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