Options Bulls Blast Pandora Stock Ahead of Earnings

P is pacing for its sixth straight win

Feb 20, 2018 at 2:01 PM
facebook twitter linkedin


This week's earnings calendar will feature Pandora Media Inc (NYSE:P), with the streaming music service slated to unveil its quarterly results after the market closes tomorrow, Feb. 21. Options traders have been blasting P stock in recent sessions, and even though the shares have a dismal history of post-earnings price action, most of the speculation has been of the bullish variety.

Drilling down on P's largest increases in open interest over the past 10 sessions, the weekly 2/23 5.50-strike call tops the list, with 30,896 contracts added. Most of this activity occurred last Thursday, when a 19,289-contract block was bought to open, according to Trade-Alert.

If this is the case, the trader paid $636,537 (number of contracts * $0.33 premium paid * 100 shares per contract) for the bullish bet. This is also the most the speculator stands to lose, should P settle south of the strike at this Friday's close, while profit is theoretically unlimited on a move above breakeven at $5.83 (strike plus debit paid).

Elsewhere, the weekly 2/23 5- and 6-strike calls and 4.50-strike puts saw significant rises in open interest in the last two weeks. Per Trade-Alert, the activity at these weekly strikes is connected, with one trader last Friday selling to open puts in order to fund a long call spread -- betting on Pandora shares closing right at $6 at week's end.

Today, options activity is accelerated, with roughly 16,000 calls and 8,000 puts on the tape -- nearly three times what's typically seen at this point in the day. It looks like call traders could be purchasing new positions at the weekly 2/23 5.50 strike, while put traders are possibly buying to open the March 4.50 strike.

Looking back over the past eight quarters, Pandora stock has closed lower in its post-earnings session five times -- including a 24.6% plunge last November. On average, the shares have swung 7.1% the next day, regardless of direction, with the options market pricing in a much more volatilite 28.6% move for Thursday's trading.

At last check, P shares were trading up 4.8% at $5.41 -- boosted on reports the company will launch its pilot programmatic audio marketplace with Volkswagen -- on track for a sixth straight daily gain. But while the stock is pacing for back-to-back closes north of its 80-day moving average for the first time since last July, it's running out of steam near $5.40, site of its early November bear gap lows.

pandora stock daily chart feb 20

 

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 

 


 


 
Special Offers from Schaeffer's Trading Partners