Apple Supplier Gets Much-Needed Bump Before Earnings

OLED stock has been crushed in recent months

Managing Editor
May 2, 2018 at 10:11 AM
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OLED screen manufacturer and iPhone X supplier Universal Display Corporation (NASDAQ:OLED) is trading higher this morning, thanks to Apple's upbeat earnings. At last glance, Universal Display stock was up 1.8% at $91.40, even after Deutsche Bank slashed its price target to $135 from $170. Of course, this is just a drop in the bucket for OLED, which has been crushed since peaking at $209 back on Jan. 19, hitting an annual low of $86.85 last week.

On the surface, options traders have been quite bullish toward the stock. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day call/put volume ratio of 2.38, indicating that calls have been purchased over puts at a faster-than-usual clip over the past two weeks.

But some of this activity could be from short sellers hedging against a sharp upside move, since short interest represents over 12% of OLED's float. In just the last two reporting periods, the number of shares sold short increased by 22.1%. Based on average daily volumes, it'd take short sellers a week to cover their positions.

With earnings due out after the close tomorrow, May 3, it's also worth noting that the tech concern sports a Schaeffer's Volatility Scorecard (SVS) of 90 out of 100. This means the equity has tended to register bigger price swings than its options premiums have priced in over the past 12 months. Ahead of tomorrow's event, the options market is pricing in an 18.4% swing -- almost double the average OLED post-earnings move of 9.3% from the past two years.


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