Marvel options traders have been buying to open calls in recent months
Marvell Technology Group Ltd. (NASDAQ:MRVL) is slated to unveil its fourth-quarter earnings report tomorrow after the stock market closes. MRVL has gained 10% year-to-date, and a sharp bounce off its 100-day moving average has the shares trading near their late-November 11-year high of $24.22, last seen up 1% at $23.82.
History suggests MRVL could continue this positive price action tomorrow, considering the stock has had a positive reaction in five out of the past seven quarters. Looking back eight quarters, the shares have averaged a post-earnings move of 5.6% in either direction in the session after the company reports. For Friday's trading, the options market is pricing in more volatile 11.3% one-day move, per implied volatility (IV) data.
In the options pits, traders have been more bullish than usual in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows MRVL with a 50-day call/put volume ratio of 10.37, ranking in the 91st percentile of its annual range. This indicates calls have been bought over puts at a much faster-than-usual clip in the past 10 weeks.
Furthermore, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.15 ranks in just the 2nd annual percentile. This low ranking suggests that short-term speculators have rarely been more call-skewed toward the stock during the past 12 months. Today, in fact, roughly 31,000 calls have changed hands -- 11 times the average intraday pace -- with significant buy-to-open activity detected at the April 25 strike.
And while some of this recent call buying is the result of speculators betting on bigger gains for MRVL shares, short interest rose 30% during the past two reporting periods, and now represents 10.2% of the stock's total available float. As such, short sellers could be hedging their bearish bets against any additional upside risk.
Regardless, another positive earnings reaction could spark a short squeeze. At MRVL's average daily trading volume, it would take almost five days for the shorts to cover their bearish bets.