Call Traders Buzzing Ahead of Cloudera Earnings

Calls are being traded at a rapid pace today

Managing Editor
Dec 5, 2019 at 1:23 PM
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Cloudera Inc (NYSE:CLDR) stock is up 1.1% at $9.96 this afternoon, with options traders likely prepping for the software firm's third-quarter report. The company's earnings are scheduled for after the close today, and below, we will dive into what the options market is expecting for the stock's post-earnings move.

CLDR has been on a steady climb higher since its June 11 record low of $4.89 -- hit in the wake of a monstrous June 6 post-earnings bear gap of 40.8% -- and has added 90% over the past six months alone. In fact, the stock has charged above long-term resistance at its 180-day moving average in recent weeks, thanks to added support at the $8.50 level.

Daily CLDR with 180MA

Taking a look into Cloudera's earnings history, the stock has had a volatile run over the past two years. The equity has closed lower the day after five of the company's past eight reports, averaging a post-earnings move of 19.3%, regardless of direction. This time around, the options market is pricing in a similarly sized 20.8% swing for Friday's trading.

In the options pits, calls are being favored. More than 11,000 call options have exchanged hands this afternoon, three times the expected rate, with volume pacing in the 94th annual percentile. The soon-to-expire weekly 12/6 10-strike call is most active, and those buying to open the contracts are betting on a post-earnings surge above $10 by tomorrow's close.

Shorts may be using these out-of-the-money options to guard against any additional upside risk. Short interest rose 11% during the most recent reporting period, and now represents 9.6% of the stock's total available float. At CLDR's average pace of trading, it would take short sellers four days to buy back their bearish bets.

Lastly, analysts have remained on the sidelines during Cloudera stock's recovery. Coming into today, 12 of 16 firms maintained a "hold" or "sell" recommendation. Plus, the equity's average 12-month price target of $9.57 comes in 3% below current trading levels.

 

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