This Retail Stock Could Be Volatile on Thursday

TLRD options are hot ahead of earnings

by Karee Venema

Published on Jun 11, 2019 at 3:04 PM
Updated on Jun 11, 2019 at 3:04 PM

Options traders are blasting Tailored Brands Inc (NYSE:TLRD) ahead of the retailer's first-quarter earnings report, due after the close tomorrow, June 12. This heavy options activity is hardly new for TLRD stock, though, with both call and put open interest perched at 52-week highs.

Today, most of the action is occurring on the put side, with 13,170 puts traded, compared to 3,017 calls. The June 6 and 7 puts are most active, and while it's not entirely clear what's happening here, it's possible one trader is rolling their puts down one strike. Elsewhere, speculators are initiating new positions at the July 6 put, with those buying to open the options eyeing a bigger move below $6 over the next five weeks.

TLRD put buyers have certainly been more active than usual in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.60 ranks in the 86th annual percentile. So, while calls have outpaced puts on an absolute basis, the rate of put buying relative to call buying has been accelerated.

This growing skepticism is seen elsewhere on Wall Street, with short interest edging up in the the most recent reporting period to 12.49 million shares. This accounts for more than one-quarter of TLRD's available float, or 5.4 times the average daily pace of trading.

Looking at the charts, it's not too hard to see why there's so much pessimism priced into Tailored Brands, with the retail stock down roughly 83% year-over-year and 57% year-to-date. Today, TLRD shares are up 3.7% at $5.82, but are still trading dangerously close to their 24-year low of $5.13 from May 31.

If past is precedent, the stock could be headed for even more losses after earnings. TLRD has closed lower the session subsequent to earnings in five of the last eight quarters -- including double-digit percentage losses following Tailored Brands' past two turns in the earnings confessional. On average, the shares have swung 14% the day after earnings, with the options market pricing in a much-larger 33.4% swing for Thursday's trading.

tlrd stock daily price chart june 11


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