Options Pits Red-Hot for RAD Stock After Earnings

Meanwhile, Rite Aid said it plans on opening two new COVID-19 testing locations this weekend

Deputy Editor
Apr 16, 2020 at 2:18 PM
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It's been a dismal day so far for pharmacy name Rite Aid Corporation (NYSE:RAD), after stepping into the earnings confessional early this morning. The firm posted fiscal fourth-quarter losses of 37 cents per share, which was wider than analysts' estimates, while the reported $5.73 billion in revenue was higher than expected. Rite Aid is maintaining its 2021 outlook, with the impact of COVID-19 in the upcoming year still uncertain. At last check, RAD is down 20.9% at $11.47. 

Shortly after posting its quarterly report, Rite Aid also announced that it would open two new coronavirus testing sites in New Jersey on Saturday, in partnership with the U.S. Department of Heath and Human Services (HHS). The company has already opened testing sites in Pennsylvania and is looking to expand testing sites to more stores in Connecticut, Ohio, New York, New Jersey, Michigan and Virginia. 

RAD's earnings report and coronavirus-related updates have attracted plenty of options traders to the equity today. So far, 25,000 calls and 9,573 puts have crossed the tape -- four times the intraday average. The April 12 put is the most popular, followed by the 4/24 15-strike call, with positions being opened at the latter. 

This preference for calls has been the norm. RAD sports a 10-day call/put volume ratio of 5.57 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 86% of all other readings from the past year, suggesting an unusually healthier appetite for long calls as of late. 

Meanwhile, analyst sentiment has not been as optimistic. Of the three covering RAD, two say "hold," and one calls it a "strong sell." Plus, the consensus 12-month price target of $8 is a 44.8% discount to current levels. 

Looking back at the charts, RAD is eyeing its biggest daily drop since bottoming out at a three-month low of $9.64 on March 12. Though the equity is still maintaining some distance from this area, thanks in part to its 320-day moving average, which has served as support since RAD gapped higher late last year. Rite Aid is now suffering a 27% year-to-date deficit, but is still clinging to a 17% year-over-year gain. 

RAD Chart Apr 16


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