FL stock's last two earnings reactions were ugly
Sneaker retailer Foot Locker, Inc. (NYSE:FL) is down 0.3% at $42.25 this afternoon, with options running hot. The company is slated to report third-quarter earnings before the open tomorrow, Nov. 22. Below, we will take a look at what the options market is pricing in for the stock's post-earnings move, and look at how the security has been performing on the charts.
For Foot Locker stock, 2019 has been a massive fallout. Since suffering a steep post-earnings bear gap in mid-May, the equity has struggled to recover. After gapping below the once-supportive 180-day moving average, it became a level of resistance for the shares, capping a breakout attempt earlier this month. However, the $40 mark appears to have emerged as support, after the stock reclaimed this level following a late-August earnings-related crash. Year-to-date, FL is down 20%.
Looking at FL's earnings history, the stock has closed lower the day after reporting in four of the past eight quarters, including the last two in a row. On average, the shares have swung 15.7% the day after earnings, regardless of direction. This time around, the options market is pricing in a smaller-than-usual 13.5% move for tomorrow's trading.
Meanwhile, near-term open interest is unusually put-heavy on Foot Locker stock. This is according to the retailer's Schaeffer's put/call open interest ratio (SOIR) of 1.11, which ranks in the 87th annual percentile. One of FL's top open interest positions is the weekly 11/22 42-strike put, where it looks like speculators bought to open the options to position for another post-earnings plunge.
This afternoon, though, FL call options are in high demand, with 22,000 contracts on the tape -- eight times what's typically seen at this point, and triple the number of puts traded. The January 2020 50-strike call is most active, and it looks like new positions are being purchased here, as traders target a breakout above the half-century mark over the next two months.