Options activity highlights earnings pattern

From 30,000 feet, Thursday morning’s stock market may have looked relatively uneventful—the S&P 500 (SPX) mostly traded in a narrow range a little above breakeven—but on the ground there was no shortage of eye-opening individual stock moves and options trades, many involving earnings announcements.

For example, Yeti (YETI) appeared on the LiveAction scan for unusual put volume, trading roughly 30 times its average number of contracts:  

YETI shares were also on the move, falling as much as 16% intraday after the company missed its headline earnings and revenue numbers, setting the stock up for its third-biggest earnings-day decline, and only its ninth one-day loss of 10% or more since it began trading in 2018:

After its previous 21 earnings announcements, the stock has fallen 10% or more only two other times, and 5% or more only seven other times—an indication of how unusual yesterday’s price action was.

While experienced traders would find such a small number of historical examples frustrating, they may also find one constant among them worth noting. Five trading days (one week) after falling 5% or more after earnings, YETI was higher in three cases and lower in four. After two weeks, though, the stock was lower in all seven.

Big earnings moves sometimes reverse (if only partially) in the near term, which can attract contrarians to situations like the one in YETI. But as the stock’s history shows, those pivots don’t happen every time, and even when they do, they may not necessarily have a long shelf life.

Market Mover Update: Two other stocks from Thursday’s LiveAction put scan were the subject of notable—and seemingly counterintuitive—trader attention. Patterson-UTI Energy (PTEN) rallied more than 15% intraday to a 10-week high on the heels of its latest earnings announcement. But it also topped the put volume scan, thanks to a 40,000-contract position (representing $36 million of stock) in the April $9 puts.

Meanwhile, put volume in The Children’s Place (PLCE) was “only” 120 times average around noon ET as the stock rallied 162% intraday amid reports of Saudi investor groups taking a majority stake in the company.¹ The stock later gave back more than half that gain.

After topping earnings estimates on Wednesday afternoon, JFrog (FROG) jumped more than 31% intraday on Thursday (see “Tech stock gets jump on earnings”).

Today’s numbers include (all times ET): Producer Price Index (8:30 a.m.), Housing Starts and Building Permits (8:30 a.m.), Consumer Sentiment (10 a.m.).

Today’s earnings include: PPL (PPL), Vulcan Materials (VMC).

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.

¹ MarketWatch.com. Why is Children’s Place’s stock soaring? Two Saudi entities have built a majority stake. 2/15/24.