Pre-Earnings Traders Line Up For Shake Shack Inc (SHAK) Options

Shake Shack Inc (SHAK) options are flying off the shelves, with the company set to report earnings tonight

by Alex Eppstein

Published on Mar 7, 2016 at 2:26 PM
Updated on Jun 24, 2020 at 10:16 AM

Shake Shack Inc (NYSE:SHAK) option traders have been buying to open calls at more than twice the rate of puts in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHL), the stock has amassed a 10-day call/put volume ratio of 2.47.

It's more of the same today, with calls running at eight times the expected intraday clip, and easily outstripping puts. From the looks of it, short-term bulls are buying to open SHAK's weekly 3/11 42- and 50-strike calls, convinced the stock will topple the out-of-the-money strikes by expiration at this Friday's close. On the other hand, short-term bears are eyeing a move down to $37, buying to open the weekly 3/11 37-strike put.

Prior to weekly options expiration, SHAK will report earnings. Specifically, the burger chain will tell all after the close tonight. The last time Shake Shack reported earnings -- which was its first time as a publicly traded company -- the stock lost 2.2% in the subsequent session. This time around, the options market is pricing in a much sharper 15.2% post-event, single-session swing.

On the charts, SHAK hasn't been much to write home about. The shares are down 1.5% this afternoon at $41.35 after a bearish weekend write-up in The Wall Street Journal (subscription required), and since their all-time high of $96.75 last May, they've surrendered 57.35%. To make matters worse, the stock has been encountering resistance at its 30-week moving average.

If history repeats itself, the recent crop of option bulls could come up empty. However, Shake Shack Inc (NYSE:SHAK) call buyers can rest assured knowing the most they've risked is the initial premium paid.

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