Pre-Earnings Skeptics Target Estee Lauder Companies Inc (EL)

Put buyers are busy in Estee Lauder Companies Inc's options pits today


Published on Nov 3, 2014 at 2:45 PM
Updated on Apr 20, 2015 at 5:09 PM

Estee Lauder Companies Inc (NYSE:EL) is set to report fiscal first-quarter earnings bright and early tomorrow. Ahead of this event, the shares are sitting on an 0.8% gain at $75.79, and the stock's options are in high demand -- crossing at triple the usual intraday pace. What's more, EL's 30-day at-the-money implied volatility has ticked 2.4% higher to 25.2%, suggesting short-term strikes are being sought out.

Digging deeper, the cosmetics firm's most active strike is the November 75 put, where 1,128 contracts have been exchanged. Three-fifths have traded at the ask price, and just 264 contracts are in open interest, pointing to buy-to-open activity. Long story short, these buyers are gambling on EL to breach the strike by the close on Friday, Nov. 21, when the front-month options expire.

Taking a step back, EL is sitting on a slim year-to-date gain of 0.5%, and has spent the majority of the past 1.5 months churning below $75. As such, delta on the out-of-the-money call sits at negative 0.43, denoting a better than 2-in-5 chance the option will be in the money at expiration.

As alluded to earlier, Estee Lauder Companies Inc (NYSE:EL) will release quarterly results tomorrow morning, and the Street is anticipating a per-share profit of 55 cents. Historically, the stock has done well following earnings, averaging a 1.3% gain in the session following its last eight reports.

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