Foot Locker Stock Options Hot Ahead of Earnings

The formerly supportive 180-day appears to have switched to a ceiling for the shares

by Emma Duncan

Published on Nov 21, 2019 at 1:47 PM
Updated on Nov 21, 2019 at 2:51 PM

Sneaker retailer Foot Locker, Inc. (NYSE:FL) is down 0.3% at $42.25 this afternoon, with options running hot. The company is slated to report third-quarter earnings before the open tomorrow, Nov. 22. Below, we will take a look at what the options market is pricing in for the stock's post-earnings move, and look at how the security has been performing on the charts.

For Foot Locker stock, 2019 has been a massive fallout. Since suffering a steep post-earnings bear gap in mid-May, the equity has struggled to recover. After gapping below the once-supportive 180-day moving average, it became a level of resistance for the shares, capping a breakout attempt earlier this month. However, the $40 mark appears to have emerged as support, after the stock reclaimed this level following a late-August earnings-related crash. Year-to-date, FL is down 20%.

Daily FL with 180MA and Highlight

Looking at FL's earnings history, the stock has closed lower the day after reporting in four of the past eight quarters, including the last two in a row. On average, the shares have swung 15.7% the day after earnings, regardless of direction. This time around, the options market is pricing in a smaller-than-usual 13.5% move for tomorrow's trading.

Meanwhile, near-term open interest is unusually put-heavy on Foot Locker stock. This is according to the retailer's Schaeffer's put/call open interest ratio (SOIR) of 1.11, which ranks in the 87th annual percentile. One of FL's top open interest positions is the weekly 11/22 42-strike put, where it looks like speculators bought to open the options to position for another post-earnings plunge.

This afternoon, though, FL call options are in high demand, with 22,000 contracts on the tape -- eight times what's typically seen at this point, and triple the number of puts traded. The January 2020 50-strike call is most active, and it looks like new positions are being purchased here, as traders target a breakout above the half-century mark over the next two months.

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