Earnings Preview: SunPower Corporation, Cliffs Natural Resources Inc, and Facebook Inc

Analyzing pre-earnings option trends on SunPower Corporation (SPWR), Cliffs Natural Resources Inc (CLF), and Facebook Inc (FB)

Jul 28, 2015 at 11:39 AM
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U.S. stocks are modestly higher today, as traders digest the latest earnings reports and await a key Fed meeting. Among the companies about to step up to the earnings plate are alternative energy issue SunPower Corporation (NASDAQ:SPWR), mining name Cliffs Natural Resources Inc (NYSE:CLF), and social networking titan Facebook Inc (NASDAQ:FB). Below, we'll take the pre-earnings temperature of SPWR, CLF, and FB.

  • SPWR will unveil its second-quarter figures after the close tonight. Over the past eight quarters, SunPower Corporation has averaged a single-session post-earnings move of 7.1%. This go-round, traders are expecting a slightly bigger swing, as the equity's near-term at-the-money (ATM) straddle suggests the options market is pricing in an 8.3% move. Speculators have favored long puts over calls during the past two weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The security's 10-day put/call volume ratio of 1.41 stands higher than 82% of all other readings from the past year, pointing to a bigger-than-usual bearish bias. On the charts, SPWR has added 1.4% today to sit at $25.47, but has spent the past month sliding beneath its 10-day and 20-day moving averages. The shares are also staring up at their year-to-date breakeven level of $25.83. 

  • A rebound in commodity stocks has CLF flirting with an 8.8% lead at $2.61. However, the shares remain almost 64% lower year-to-date, and just touched a decade-plus low of $2.28 a week ago. Against this backdrop, short sellers have piled on, with these bearish bets now accounting for more than half of Cliffs Natural Resources Inc's total float. Likewise, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.12 registers in the 80th percentile of its annual range. What's more, CLF's short-term option bears are paying up to place pre-earnings bets, as the security's Schaeffer's Volatility Index (SVI) is docked at an annual high of 120%. Historically, the equity has averaged a one-day post-earnings move of 7.3% over the past eight quarters. Option traders are pricing in a much bigger swing of 14.8% after tomorrow morning's release, per CLF's near-term ATM straddle.

  • Finally, FB will follow sector peer Twitter Inc (NYSE:TWTR) into the earnings confessional, with the company set to report second-quarter figures after tomorrow's close. Over the past eight quarters, FB has averaged a move of 7.9% in the session subsequent to reporting. Expectations are in line with history, as the stock's near-term ATM straddle is pricing in an 8.4% swing. Option buyers have been stacking up their bullish bets ahead of earnings, as Facebook Inc's 10-day ISE/CBOE/PHLX call/put volume ratio of 3.17 stands higher than just 97% of all other readings from the past year. Short-term speculators are paying a pretty penny, too, as FB's SVI of 52% is docked at an annual high. Since touching a record high of $99.24 last week, FB has taken a breather. The shares were last seen 0.4% lower on the day, at $93.81.

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