Blowout Earnings Draws BlackRock Call Traders

BLK options are now affordably priced post-earnings

Jake Scott
Jul 17, 2020 at 10:07 AM
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Just a little under a month ago the CEO of BlackRock, Inc. (NYSE:BLK) announced the company's commitment to increasing its Black workforce. A lot has happened in the time since, including today's trip into the earnings confessional where the asset management firm reported fiscal second-quarter earnings and revenue that bested Wall Street's estimates. Additionally, BlackRock said profit was up 21% from a year ago, and assets under managements saw a 7% increase. As a result, the shares of BlackRock stock are up 1.2%, last seen trading at $573.91.  

Out of the gate, BlackRock stock roared past Wednesday's two-year peak and nabbed a fresh multi-year high of $578.96. Now up 21% over the last three months, the shares have enjoyed support from their ascending 30-day moving average.

The options pits are full of bullish activity, it seems. BlackRock stock's 10-day call/put volume ratio of 1.86 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 92% of readings in its annual range. In other words, short calls are all the rage, being ordered up at a quicker-than-usual clip.

Today is more of the same -- calls are trading at 18 times the average intraday amount and more than six times the number of puts exchanged so far today. Most popular by far is the July 600 call, followed by the weekly 7/24 600-strike call.

Now with earnings in the rear-view mirror, a volatility crush means options are affordably marked. BLK's Schaeffer's Volatility Index (SVI) of 32% sits in the 15th percentiles of all other readings from the past year. This means options players have been pricing in relatively low volatility expectations at the moment.   Also worth mentioning, BLK's Schaeffer's Volatility Scorecard (SVS) sits at a relatively high 84, indicating BlackRock stock has tended to exceed option traders' volatility expectations during the past year.

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