DOCU was overbought heading into the event
The shares of DocuSign Inc (NASDAQ:DOCU) are down 8.6% at $243.96 at last check, one of the many casualties of today's market sell-off. Yesterday, the software stock hit a record high of $290.23, after Oppenheimer hiked up its price target to $300 from $200. Still up around 230% year-to-date, DOCU's volatile price action comes ahead of the software company's second-quarter earnings -- due out after the close today.
Looking back at its past eight quarterly reports, five of DOCU's post-earnings sessions were negative. The security averaged a next-day return of 9.1%, regardless of direction, which is much smaller than the 21.8% move the options market is pricing in this time around.
Despite calls outnumbering puts on an absolute basis, the stock's 50-day put/call volume ratio of 0.59 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 74% of readings in its annual range. This suggests a healthier-than-usual appetite for long puts.
Today is more of the same, though with higher-than-usual volume in the options pits. So far, 128,000 calls and 52,000 puts have crossed the tape -- five times what's typically seen at this point. The weekly 9/4 300- and 250-strike calls are the most popular, with new positions being opened at both.
Also worth noting, a short-term breather could already be in the cards for DocuSign stock. This is per its 14-day Relative Strength Index (RSI) of 77, which sits firmly in "overbought" territory.