Pre-Earnings Skepticism Ramps Up on Lululemon Athletica inc. (LULU)

Lululemon Athletica inc. (NASDAQ:LULU) will report earnings Wednesday morning

Mar 28, 2016 at 2:30 PM
facebook X logo linkedin


Yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU) is scheduled to unveil its quarterly earnings report ahead of the market open on Wednesday. The stock had negative earnings reactions following Lululemon's last two quarterly results -- averaging a loss of 14.8% in the session subsequent to LULU's reporting -- which may explain why put volume has been picking up speed.

Today, in fact, puts are crossing the tape at three times the expected intraday rate -- and outpacing calls by a nearly 3-to-1 margin. Most active are LULU's weekly 4/1 55- and 60-strike puts, due largely to two symmetrical blocks of 3,850 contracts that simultaneously crossed the tape earlier.

According to Trade-Alert, the activity here is most likely the result of one trader initiating a long put spread in the weekly series for an initial net debit of $700,700 (3,850 contracts * $1.82 premium paid * 100 shares per contract). Ideally, LULU will settle the week at $55 -- home to the sold strike -- a 9.3% slide from the equity's current perch at $60.67.

While this debit spread represents a moderately bearish outlook, it appears as if a number of traders have been more straightforward with their skepticism. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), LULU's 10-day put/call volume ratio of 0.96 ranks in the 69th percentile of its annual range.

What's more, the stock currently sports a Schaeffer's put/call open interest ratio (SOIR) of 1.42. Not only does this show that puts outweigh calls among options expiring in three months or less, but it ranks in the 88th annual percentile. In other words, short-term speculators are more put-heavy than usual toward LULU.

Meanwhile, with earnings on the horizon, it's not the most opportune time to purchase premium on LULU's near-term options. For starters, the stock's 30-day at-the-money implied volatility of 48.4% sits in the 79th annual percentile. Plus, LULU's Schaeffer's Volatility Scorecard (SVS) of 8 indicates the options market has tended to overprice the equity's ability to make big moves on the chart over the past year.

As touched upon, Lululemon Athletica inc.'s (NASDAQ:LULU) has turned in uninspiring technical performances following the firm's last two turns in the earnings confessional. Longer term, the shares have given back 13.3% since hitting an annual high of $70 on April 10, with recent rally attempts halted in the $63.50-to-$65 range.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical  levels, and top economic stories straight to your inbox.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI