Sprint Corporation (S): Pre-Earnings Option Players Grow Optimistic

Sprint Corporation will report earnings after next Monday's close

by Karee Venema

Published on Oct 28, 2014 at 2:44 PM
Updated on Apr 20, 2015 at 5:32 PM

Like the broader equities market, Sprint Corporation (NYSE:S) is trading higher today -- up 1.5% to linger near $6.13. Option players are responding in kind, scooping up calls at a rate 1.7 times the average intraday pace. Based on the equity's 30-day at-the-money implied volatility (IV), which is 4.9% higher at 48.8%, short-term contracts are in high demand.

Drilling down, Sprint's weekly 11/7 6.50-strike call has seen the most action by far, with 11,129 contracts on the tape. The majority of the volume occurred when a multi-exchange sweep of 10,383 contracts was bought to open for $0.10 apiece, resulting in an initial cash outlay of $103,830 (number of contracts * premium paid * 100 shares per contract).

This also represents the most the speculator stands to lose, should S be sitting south of $6.50 at next Friday's close -- when the weekly series expires -- a time frame which includes the company's upcoming earnings report. Gains, meanwhile, will accrue with each step above breakeven at $6.60 (strike plus premium paid) the stock takes. Delta on the call is docked at 0.30, suggesting a less than 1-in-3 chance the option will be in the money at expiration.

As touched upon, Sprint Corporation (NYSE:S) is scheduled to unveil its third-quarter earnings report after next Monday's close. Over the past four quarters, the equity has fared well in the session subsequent to reporting, averaging a gain of 3.7%. This runs at a stark contrast to the stock's longer-term technical backdrop, though, with S down 43% year-to-date.

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