Put Traders Make a Rare Appearance Ahead of American Express Earnings

One trader may be initiating a long put spread in the August series

Managing Editor
Jul 18, 2019 at 1:43 PM
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Financial giant American Express Company (NYSE:AXP) is 1% higher this afternoon at $128.41, ahead of the company's quarterly report, slated for before the market opens tomorrow, July 19. Below, we will take a look at how AXP has performed on the charts, and see what the options market is pricing in for the shares' post-earnings move.

American Express stock has been on a sharp uptrend since late December, now up 34% year-to-date. Guiding the shares' surge has been the supportive 20-day and 40-day moving averages -- the latter capturing a brief pullback in late May and early June. Most impressive, the stock touched a record high $129.34 this past Tuesday, July 16.

Daily AXP with 20 and 40MA

Looking at the credit card company's earnings history, the Dow stock has closed higher the day after earnings in four of the past eight quarters -- including the past three in a row. Over the past two years, the shares have swung an average of 2.4% the day after earnings, regardless of direction. This time around, the options market is pricing in a larger-than-usual 3.4% swing for Friday's trading. 

Meanwhile AXP's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.81, and ranks in the low 18th annual percentile. This suggests call open interest outweighs put open interest by a greater-than-usual margin on options expiring within the next three months.

Drilling down, the July 131 call is home to peak front-month open interest. Data from Trade-Alert indicates a mix of buy- and sell-to-open activity here in recent weeks. Those buying the calls expect AXP stock to break out above $131 by expiration at tomorrow's close, while those selling the calls expect the strike to serve as a near-term ceiling -- or perhaps hope to profit on a post-earnings volatility crush.

Today, though, American Express puts are seeing a surge in volume. At last check, around 11,000 puts were on the tape, compared to fewer than 5,600 calls. It looks like one trader may be initiating a long put spread with the August 120 and 125 strikes, expecting AXP to retreat back to $120 by August options expiration.

 

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