Earnings Preview: Mobileye NV, Chesapeake Energy Corporation, and Transocean LTD

Mobileye NV (MBLY), Chesapeake Energy Corporation (CHK), and Transocean LTD (RIG) are set to report earnings tomorrow

Feb 23, 2016 at 2:27 PM

It's already been a busy week for corporate earnings, and the parade continues tomorrow. Specifically, auto software provider Mobileye NV (NYSE:MBLY) will report, along with commodity stocks Chesapeake Energy Corporation (NYSE:CHK) and Transocean LTD (NYSE:RIG). Let's take a pre-earnings look at MBLY, CHK, and RIG.

MBLY will report earnings bright and early tomorrow, and the options market is pricing in a 14.9% move in the ensuing session. Historically speaking, that's a massive swing, considering the shares have averaged a much more modest 2.6% move in the sessions directly following the company's last six quarterly earnings reports. Underscoring expectations of an outsized swing is MBLY's 30-day at-the-money (ATM) implied volatility (IV), which at 78.4% ranks in the 93rd percentile of its annual range.

Ahead of earnings, Mobileye NV option traders have been placing bearish bets over bullish in recent months. The stock's 50-day put/call volume ratio of 1.51 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) outstrips 78% of all other readings from the prior year. This bearish bias makes sense in light of MBLY's technical demise, as the stock has plummeted 55% since hitting a record high of $64.48 in mid-August, last seen at $28.97.

CHK will also report earnings Tuesday morning, with the options market implying a nearly 32% single-day move. Big intraday swings are nothing new to the stock, which at last check was down more than 6.7% at $2.22 -- continuing its long-term trend lower, as the energy sector gets pummeled on low prices. Year-over-year, in fact, CHK has surrendered close to 90% of its value. Not surprisingly, short sellers have been all over the sinking shares. Over one-third of Chesapeake Energy Corporation's float is sold short, and at its average daily trading levels, it would take almost eight sessions to cover these positions.

RIG earnings are due out after the close tomorrow. Ahead of the event, volatility expectations are much higher than usual, per the stock's 30-day ATM IV of 78.3% -- in the 89th percentile of its 12-month range. Currently, the shares are down 2.1% at $8.65, after last week striking an all-time low of $8.08. Nonetheless, short-term option traders are more call-focused now than at any other time in the past 52 weeks. Specifically, Transocean LTD's Schaeffer's put/call open interest ratio (SOIR) of 1.21 is the lowest reading recorded in the prior year. Elsewhere, 36.7% of the stock's float is sold short, which would take two weeks to cover, at RIG's average daily volumes.

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