Call volume is accelerated on OmniVision Technologies
(NASDAQ:OVTI) today, ahead of tomorrow night's turn in the earnings confessional. The front- and back-month series of options are in focus, with a number of contracts having traded at the June 15 and July 16 calls. The majority of the collective 663 positions exchanged have done so at the ask price, and implied volatility is higher at both strikes, pointing to buy-to-open activity. In other words, it appears some of today's traders are hoping for some earnings-induced upside for OVTI.
The near-the-money June 15 calls were purchased for a volume-weighted average price (VWAP) of $0.82, meaning speculators will begin to profit with each step north of $15.82 (strike plus VWAP) OVTI takes through the close on June 21. The VWAP for the out-of-the-money July 16 calls is $0.52, making breakeven $16.52, or 10.4% above the stock's current perch of $14.96.
Should the stock follow in the historical footsteps of its post-earnings price action, today's traders could be at risk of surrendering the initial cash outlay -- which is also the maximum loss on the play. On average, OmniVision has shed a respective 8.5% and 6.6% in the subsequent session and week after its last seven reports.
This may be why -- outside of today's option activity -- puts have been in order. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.73 ranks in the 94th percentile of its annual range. Simply stated, puts have been bought to open over calls with more rapidity just 6% of the time within the past year.
In similar fashion, the equity's Schaeffer's put/call open interest ratio (SOIR)
of 0.77 ranks higher than 94% of other such readings taken in the last 12 months. What this means is that short-term speculators have rarely been more put-heavy toward OVTI.
On the charts, the shares have displayed some upward momentum of late, and have bounced 24% from their most recent low of $12.06 -- tagged on April 22. Plus, the stock has outperformed the broader S&P 500 Index
(INDEXSP:.INX) by nearly seven percentage points over the past month. OmniVision has found a technical friend in the form of its 10-day moving average, which has not only given the stock a lift since late April, but also contained last Thursday's modest pullback.
Despite the negative price action that typically occurs following OVTI's earnings report, the stock has matched or exceeded analysts' bottom-line estimates in five of the last seven announcements. For the fourth quarter, Wall Street is calling for a profit of 21 cents per share for OmniVision Technologies.
This article by Karee Venema was originally published on Schaeffer's Investment Research.
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No positions in stocks mentioned.