Bullish Options Traders Blitz Ferrellgas Partners, L.P. (FGP) Ahead of Earnings

Ferrellgas Partners, L.P. (FGP) is slated to report earnings ahead of tomorrow's open, and call buying has been popular ahead of the event

Dec 8, 2016 at 3:16 PM
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Ferrellgas Partners, L.P. (NYSE:FGP) is slated to take its turn in the earnings confessional tomorrow morning, and ahead of the event, the energy stock is soaring on an upgrade to "sector perform" from "underperform" at RBC. And while the brokerage firm said Ferrellgas Partners had "focused on reducing its debt leverage to more optimum levels," it slashed its price target on the shares to $6 from $11. Nevertheless, FGP stock is trading up 16.8% at $6.93, and options traders are calling for even more post-earnings upside.

At last check, FGP calls were trading at three times the average intraday pace, with 3,404 contracts on the tape. Puts are also crossing at a faster-than-usual clip, though just 531 put options have traded. The December 7.50 call has seen the most action, and it looks like most of the 2,125 contracts that have changed hands may have been bought to open. If this is the case, call buyers expect FGP stock to break out above $7.50 by next Friday's close, when the front-month options expire.

Today's call-skewed trading is hardly new in FGP's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 5.05 calls for each put over the past 10 sessions. Plus, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.36 ranks lower than 93% of all comparable readings taken in the past year. In other words, short-term speculators are more call-heavy than usual toward FGP.

Outside of the options pits, sentiment is more mixed. Short interest, for example, has dropped 55% since hitting a four-year high in early October, and currently accounts for just 1.8% of the stock's available float. Analysts, meanwhile, are fairly skeptical. Although a number of brokerages have joined RBC in upwardly revising their ratings recently, all seven analysts covering the shares maintain a "hold" opinion or worse.

Historically speaking, the shares of Ferrellgas Partners, L.P. (NYSE:FGP) tend to underperform in the session subsequent to reporting -- closing lower in seven of the past eight quarters. This would only echo the energy stock's longer-term technical trajectory, with FGP down more than 58% year-to-date, and fresh off a Dec. 1 record low of $5.04.

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