Halliburton Put Options Pricey Ahead Of Earnings
Schaeffer's Investment Research | Oct 21, 2018 03:28AM ET
Oil name Halliburton Company (NYSE:HAL) is trading up 1.9% at $38.73 today, but the shares have been declining since their mid-May highs. Most recently, HAL touched a two-year low of $35.75 on Sept. 2.
More broadly, oil stocks are taking a hit this week on oversupply concerns and a sector-wide bear note out of J.P. Morgan Securities yesterday. Meanwhile, Halliburton is slated to report its third-quarter earnings before the market opens, Monday, Oct. 22, and here we'll dive into what the options market has priced in for the stock's post-earnings moves.
Digging into its earnings history, HAL closed lower the day after reporting in six of the last eight quarters, including an 8.1% drop after its late-July report. Looking broader, the shares have averaged a 3.2% move the day after earnings over the last two years, regardless of direction. This time around, options traders are pricing in a larger-than-usual 5.1% swing for Monday's trading.
Digging deeper, short-term traders appear to be betting on a downside move for HAL. This is based on the stock's 30-day implied volatility skew of 8.1%, which ranks in the 80th annual percentile -- indicating puts are more expensive than usual relative to calls.
Lastly, the security's Schaeffer's Volatility Scorecard (SVS) is 95 out of 100. This lofty ranking shows that HAL has a tendency to make larger-than-expected moves on the charts compared to what the options market has priced in over the past year.
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