YUM! Brands, Inc. (YUM) Post-Earnings Bulls Gamble on Record Highs

Yum! Brands, Inc. (NYSE:YUM) hit its highest perch on record earlier

Apr 22, 2015 at 1:28 PM
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Unlike fellow fast food concern Chipotle Mexican Grill, Inc. (NYSE:CMG), Yum! Brands, Inc. (NYSE:YUM) is soaring in the wake of its quarterly results -- up 4.2% at $84.23 -- and earlier touching a record peak of $85.30. Specifically, the company exceeded analysts' profit estimate, thanks to a smaller-than-expected drop in China sales. Additionally, CEO Greg Creed said, "We will deliver full-year [earnings-per-share] EPS growth of at least 10 percent, with a strong second half in China and solid brand-building initiatives under way at each of our divisions." Against this backdrop, calls are trading at three times the average intraday pace, with a number of traders rolling the dice on even higher highs.

Drilling down, the equity's June 90 call has received notable attention today, and it appears as if new positions are being purchased here. By buying the calls to open, speculators expect YUM to topple the $90 mark by the close on Friday, June 19 -- when back-month options expire -- and move into never-before-seen territory. Amid today's rally, delta on the call has jumped to 0.23 from 0.15 at last night's close, indicating an increased probability of an in-the-money finish.

Heading into today's session, options traders were already optimistic toward a stock that's rallied nearly 17% since the start of February, thanks to a lift from its 40-day moving average. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, YUM's 50-day call/put volume ratio of 2.33 ranks in the 96th percentile of its annual range.

Echoing this call-skewed bias is Yum! Brands, Inc.'s (NYSE:YUM) Schaeffer's put/call open interest ratio (SOIR) of 0.47. Not only does this indicate call open interest more than doubles put open interest among options expiring in three months or less, but it rests lower than 98% of all comparable readings taken in the past year. In other words, speculative traders have rarely been as call-heavy toward YUM as they are now.


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