Stratasys, Ltd. (SSYS) Option Bears Up the Ante Ahead of Earnings

Stratasys, Ltd. is lower on Hewlett-Packard Company news

by Karee Venema

Published on Oct 29, 2014 at 3:15 PM
Updated on Jun 24, 2020 at 10:16 AM

Stratasys, Ltd. (NASDAQ:SSYS) is 1.8% lower, after tech heavyweight Hewlett-Packard Company (NYSE:HPQ) announced it is throwing its hat into the 3-D printing ring. This move lower only echoes the equity's recent technical troubles, with SSYS down 4.1% month-to-date at $115.87, thanks to newfound pressure from its 40-day moving average. This dreary price action isn't enough to satiate today's options bears, who are calling for a steeper slide in both the short- and long-term.

Taking a quick step back -- puts are trading at four times what's typically seen at this point in the day, and are outpacing calls by a 2-to-1 margin. Most active is the stock's weekly 10/31 109-strike put, where 687 contracts have changed hands. The majority of these have gone off at the ask price, implied volatility is up 7.9 percentage points, and volume outstrips open interest -- all signs new positions are being purchased. Delta on the put is docked at negative 0.12, suggesting a 12% chance the option will be in the money at Friday's close, when the weekly series expires.

Longer-term traders, meanwhile, are buying to open the stock's March 80 put. Based on the volume-weighted average price (VWAP) of $2.29, breakeven for today's put buyers is $77.71 (strike less VWAP), or territory not charted by SSYS since June 2013. Gains will accrue on a move south of here, while losses are limited to the premium paid, should the stock be perched atop $80 at March options expiration.

On the fundamental front, Stratasys, Ltd. (NASDAQ:SSYS) is slated to take its turn in the earnings confessional ahead of the open next Wednesday, Nov. 5. Over the past four quarters, the stock has averaged a single-session post-earnings gain of 2.8% -- which includes a nearly 15% pop in August. This time around, the options market is pricing in a post-earnings move of roughly 9%.


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