Investors Make Adjustments on Medtech Stock Before Earnings

One options trader just purchased a large number of put contracts at the 90 strike

Digital Content Manager
Feb 16, 2022 at 2:43 PM
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Medical technology company Cerner Corporation (NASDAQ:CERN) has earnings due out after the close this evening, and investors have made some recent adjustments. For one, Cubist Systematic Strategies decreased its stake in Cerner by 29.4% during the third quarter, per the most recent filing with the Securities and Exchange Commission (SEC). This sale was worth roughly $6.78 million and included 40,128 shares of the stock. 

Cerner is seeing another big adjustment in its options pits, too. Put volume is running at nearly four times the intraday average, and it looks as if one investor bought 3,487 contracts on the March 90 put for a volume-weighted average price (VWAP) of $0.65. If this is the case, breakeven for the put buyer at the close on Friday, March 18, is $89.35 (strike less premium paid).

The stock was last seen at $92.07, less than 2% away from its Dec. 30 record high of $93.44. CERN is up 26.4% in the last 12-months, with help from a mid-December bull gap, while the $91 area captured a gradual selloff late last month. Despite the favorable technical setup, 11 of 14 brokerages still rate the shares a "hold" or "sell"

A look back at CERN's last eight earnings reports show the stock managing a positive next-day return only three times, though this includes a 5.1% pop after its last report in October. Regardless of direction, CERN averaged a post-earnings swing of 2.8% during the past two years. 

Those options traders are in luck, because the stock's Schaeffer's Volatility Scorecard (SVS) sits at a 84 out of 100. This means the security has exceeded option traders' volatility expectations during the past year.

 

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