Options Pop Ahead of Nordstrom Earnings

The security could see a short-term drop, according to historical data

Digital Content Manager
Nov 20, 2019 at 1:47 PM
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Nordstrom, Inc. (NYSE:JWN) will take its turn in the retail-heavy options arena after the close tomorrow evening, and is selling off before hand. Sector headwinds, brought on by dismal earnings from Home Depot (HD) and Kohl's (KSS), has the equity down 3.5% to trade at $34.24 so far today, on course for its third consecutive drop.

What's more, JWN is set to close below its 40-day moving average for the first time since early September, which could lead to a short-term drop on the charts. According to Senior Quantitative Analyst Rocky White -- who's data shows this signal flashing seven times prior in the last three years -- the security has only been higher one week later 16% of the time, and averaged a one-week drop of 1.6%. 

JWN Nov 11

Digging through even more historical data, during the past eight post-earnings sessions, JWN closed lower, notching a 13.7% dip this time last year, and a 10.9% slide in May 2018. On the other hand, the stock did climb 15.9% the session after its last quarterly report in August. On average, the security has swung 8.7% regardless of direction. This time around, the options pits are pricing in a much bigger move at 17.1%. 

These traders have been quite active today. So far, 5,079 calls and 5,003 puts have exchanged hands -- double what's normally seen at this point. The December 37.50 call is popular, followed by the 11/22 35-strike put, where new contracts are being purchased. 

Looking back, things have been increasingly bearish in the options pits. While calls still outnumber puts on an overall basis, at the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), JWN sports a 10-day put/call volume ratio of 0.94 that sits in the 68th percentile of its annual range, indicating an unusual preference for puts.

This is echoed by the stock's Schaeffer's Open Interest Ratio (SOIR) of 1.43, which sits higher than 70% of all other readings from the past year. This means short-term options players have rarely been more put heavy. 

 

 

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