Are Smith & Wesson Holding Corp (SWHC) Options Traders Running Scared Ahead of Earnings?

Smith & Wesson Holding Corp (NASDAQ:SWHC) options bears are emerging ahead of earnings

Jun 16, 2016 at 11:22 AM
facebook X logo linkedin


Smith & Wesson Holding Corp (NASDAQ:SWHC) options have been in high demand recently, as the gun manufacturer prepares to release its fiscal fourth-quarter earnings report after the close today, and amid an increasingly heated debate on gun control. In fact, some on Wall Street are anticipating a slowdown in the gun industry, while Senate Democrats just held a 15-hour filibuster to address firearms. 

Data shows SWHC options volume running above average levels in each of the past nine days, with put and call open interest both sitting at 12-month highs. While the gun stock's call options have been more popular than puts on an absolute basis recently, that may not tell the whole story about trader sentiment ahead of earnings. 

For instance, more calls have been bought to open than puts during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). However. SWHC's 10-day put/call volume ratio across these exchanges has increased by almost 400% since the start of the month, with the current ratio of 0.76 outranking 87% of all others from the past year. In other words, traders have been buying to open SWHC puts over calls at a much faster-than-usual clip ahead of earnings.

Similarly, the gun stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.57, which sits in the 93rd annual percentile. This tells us that short-term options traders are much less call-skewed than normal. 

Outside the options pits, bearish sentiment has actually been on the decline. Short interest on SWHC dropped by 11.4% over the past two reporting periods -- though these bears still control over 15% of the stock's float. At SWHC's average daily volume, it would take short sellers nine days to cover their positions. 

SWHC has edged higher today to trade at $21.50, attempting to gain a foothold atop its 200-day moving average. However, the stock has fallen more than 29% since it shot to an all-time high of $30.44 in March, with recent breakout attempts cut short by its descending 60-day moving average. 

Historically, Smith & Wesson Holding Corp (NASDAQ:SWHC) has enjoyed positive post-earnings sessions for six straight quarters. Analysts are expecting the company to report per-share earnings of 54 cents on sales of roughly $214.6 million, and the latest data suggests firearm purchases are higher on a year-over-year basis.

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