Earnings Preview: Advanced Micro Devices, GE, Seagate Tech

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

Apr 16, 2015 at 1:47 PM
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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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