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Big Pre-Earnings Options Flow

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A number of different names saw increased options activity ahead of their earnings reports. All three - Micron Technology (MU), Kroger (KR), and TIBCO Software (TIBX) - are due to report in the next few days and saw bullish action reflecting confidence in each company ahead of the news. While call buyers were active in MU and KR, a large put writer opened a position in TIBX.

Yesterday, MU was up $0.48 to new multi-year highs at $13.24 on an analyst upgrade and 2.5x the daily options volume. 167,000 calls and 25,000 puts traded on MU Monday. The top trades were part of a spread, in which the investor sold 16,000 October 12 calls on MU at $2.41 and bought 18,500 October 14 calls for $1.40. Looking at the open interest this morning, the massive spread was a roll up in strikes. We noticed large October 12 call buyers in MU in early-May, paying just $0.34 per contract. The stock has surged since that time and, while some of the calls are now being sold-to-close, new positions in October 14 calls are being bought-to-open. If so, the position adjustment is expressing confidence in MU ahead of its earnings, due out after the closing bell tomorrow. July 15 calls on MU saw opening activity as well.

MU Daily Contract Volume
Source: Trade Alert

Meanwhile, KR was up $0.43 to $35.18 yesterday ahead of its earnings, due out Thursday afternoon. On the options front, 9,450 calls and 930 puts traded on the stock, a ratio of ten-to-one. The activity included a sweep buyer of 4,800 July 35 calls on KR for $1.28 per contract across multiple exchanges when the market was $1.15 to $1.25. At the end of the day, 5,450 July 35 calls traded on KR and the flow created 3,039 contracts of new open interest at that strike. Earnings due this week.

Lastly, TIBX, which also reports Thursday afternoon, saw big opening put sellers Monday. Shares were flat at $21.54 on the day and a sweep of 4,800 November 20 puts traded on the software-maker at $1.52 across multiple exchanges when the bid-ask was $1.55 to $1.65. At the end of the day, the flow created 6,000 contracts of new open interest and data from the all-electronic International Securities Exchange confirm that the puts were being sold-to-open. If so, the investor is probably a willing buyer of the stock for $20 (reading to get assigned on the puts) through the November expiration and is expressing confidence in TIBX ahead of the company's profit report.

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