Options Traders Flock to Snap Stock; Pre-Earnings Puts Popular on Microsoft

Microsoft stock has a history of moving higher post-earnings, and is on pace for a seventh straight gain

Jul 17, 2017 at 12:53 PM
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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are Snapchat parent Snap Inc (NYSE:SNAP), and Dow stock Microsoft Corporation (NASDAQ:MSFT). Here's a quick look at how options traders have been placing bets on shares of SNAP and MSFT. 

June 17 MAO

Snap Stock Trying to Snap Out Of Slump

Snap stock is a new entry to the list, and and it coincides with a rough stretch for the tech upstart. At last check, SNAP stock was up 0.6% to trade at $15.35, after last week exploring record lows. Specifically, the shares were hit with a pair of underwriter downgrades, and fell past their IPO price of $17 for the first time, to a new low of $15.21 on Wednesday. SNAP's 20-day moving average has served as a ceiling since early June, and the shares have shed nearly half their value since peaking at $29.44 on March 3, their first day of trading. 

As a result of the sharp decline, SNAP stock sports a 14-day Relative Strength Index (RSI) of 28 --  firmly in "oversold" territory, and an indication a short-term bounce may have been in the cards. This may not be what short-term options traders want to hear, however. Over 480,370 contracts have been exchanged in the past 10 trading days, of which 255,926 were puts. Meanwhile, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.25 indicates that Snap puts outnumber calls among options expiring within three months.

In the front-month series, the July 20 strike is home to peak open interest for both calls and puts. Diving deeper into the options pit, the soon-to-be front-month August 17 put appears quite popular, with 22,582 contracts outstanding. Buyers of these puts expect SNAP shares to remain below their IPO price of $17 in the next several weeks.

Microsoft Stock In Focus As Earnings Loom

Microsoft stock is currently up 0.5% to trade at $73.11, on pace for its seventh straight daily gian. The blue chip peaked at $73.23 earlier today -- within pennies of its all-time high of $73.27, notched on Friday. What's more, Microsoft Corporation will report earnings on Thursday, and the stock has a history of outperforming after these reports.

MSFT stock has moved higher the day after earnings in six out of the last eight quarters -- including the last four --  and boasts an average one-day reaction of 4.9% in either direction. Ahead of earnings, Morgan Stanley recently waxed optimistic on MSFT stock, and 17 out of 21 analysts consider the equity a "strong buy."

An earnings bounce this week could build on what has been an already-solid year for MSFT shares, which have tacked on 17% year-to-date. The security's 80-day moving average has acted as firm support since late 2016, and contained MSFT through tech-sector headwinds in June.

Moving into the options pit, however, we've see a noticeable increase in Microsoft put buying in the past two weeks. MSFT has a 10-day put/call volume ratio of 0.61 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 76th percentile of its annual range, and means puts were bought to open at a faster-than-usual clip. However, considering MSFT stock's technical prowess of late, the recent flurry of put buying -- particularly at out-of-the-money strikes could be Microsoft shareholders buying protective puts, in the event the stock takes a turn for the worse.



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