Earnings Season Draws Put Players to these 2 Stocks

CAR and BWLD have attracted put traders before and after earnings

Nov 6, 2017 at 2:35 PM
facebook twitter linkedin

Car rental expert Avis Budget Group Inc. (NASDAQ:CAR) and restaurant operator Buffalo Wild Wings (NASDAQ:BWLD) are two stocks that have seen notable options volume recently, with the former preparing to report earnings after the close today, and the latter reporting strong results less than two weeks ago. Here's a closer look at how options traders have been placing their bets on CAR and BWLD stocks.

The 20 S&P MidCap 400 Index (MID) stocks listed in the table below have attracted the highest total options volume during the past 10 trading days Stocks highlighted in yellow are new entries to the list. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

options trading

Options Bears Eye Longer Time Frame for CAR Stock

Shares of Avis Budget Group have been consolidating in the $41 area in recent weeks, just above their late-2016 highs. The equity was last seen trading at $41.54, and has shot up 51% during the past six months. What's more, the stock exploded for a 12.8% gain in the session after last November's earnings release. Still, options traders have focused on puts in recent weeks.

As the table above shows, close to 30,000 puts have crossed during the past 10 days, compared to just 9,207 call options. This put-skew is further illustrated by CAR's 10-day put/call volume ratio of 5.65 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), showing almost six puts have been bought to open for every call.

However, it doesn't appear these bears are exactly trying to play tonight's earnings report. That's because most positions were added at longer-term contracts, most notably the January 2019 30-strike put. The January 2018 30- and 35-strike puts also saw large increases in open interest.

Put Player Piles on Buffalo Wild Wings Despite Earnings Beat

Buffalo Wild Wings stock touched a post-earnings peak of $127.95 on Oct. 27, but has since pulled back to trade at $117.40. The $115 area has capped the shares' downside in recent sessions, a level that acted as resistance in early August and mid-September. Year-over-year, BWLD is down 19.1%.

In the options pits, traders have been showing bearish tendencies, with more than 23,500 puts crossing in the past two weeks, compared to fewer than 15,000 calls. Moreover, the equity has a 10-day put/call volume ratio of 1.81 at the ISE, CBOE, and PHLX, good enough to rank above four-fifth of readings from the past year, indicating a stronger-than-usual appetite for bearish bets.

During this time frame, the November 90 put saw the largest increase in open interest, and is now home to peak open interest. Also seeing a notable increase in open interest was the November 100 put, which is second in overall open interest. Data from the major options exchanges shows a mix of buying and selling on both contracts, with buyers hoping for BWLD to slide below the strikes and the sellers expecting the levels to hold as technical support.

On the one hand, buying at these out-of-the-money puts could be a sign of hedging from long-term shareholders bracing for a sharp drop. However, Buffalo Wild Wings stock was trading right at $100 at the time of earnings, so betting on a post-earnings sell-off to $90 wouldn't be completely out of the question.


If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Master Portfolio Trial


Special Offers from Schaeffer's Trading Partners