Today feels like a break in the action. After some hard sprinting, we have a cool-down lap. Everyone's catching their breath, but no one is stopping completely.
Decker Outdoor (DECK) was a name I loved trading around earnings time. The short interest has often been high and the stock is still carrying a short interest in the high teens into earnings. The chart has been rolling over and options are pricing nearly a 10% move even though we haven't seen such a move since January 2014 when the stock dropped nearly 20%. Since then, most of the initial after-hours moves have faded and the stock has been turning in low-single-digit moves. The moves spawned by earnings hold a decent R-squared score, leading me to conclude there is a better-than-average chance we see a move less than 5%, and the higher probability play here is to expect a move smaller than the current pricing of the options market. Tie in the fact the last five post-earnings-day moves were 7% or less by close and that's how I would lean.
One of two big growth names tonight is Palo Alto Networks (PANW). If you're looking for low P/E's, then swipe left, that's not what this one is about right now. This is another name with a good-sized short interest nearing double digits and a decent-sized move expected after earnings, clocking in right under 8%. PANW has been the most random of the names here, so the projected best fit of 6% is more of a guess than even a guideline. That being said, PANW hasn't posted a post-earnings move over 7.5% in nearly two years. A higher-beta name, its moves have been tied more to the market than earnings. It's not a name where I'd chase volatility even if a 7.9% move priced in options looks somewhat cheap. Based on history and a bit of a statistical guess, it is probably a little high, but only a little high as I would still expect a 5%-6% move here. If I were going to play it, then I would probably look at a tight upside call spread, like a weekly $150-$155 call spread for $1.80 if I were going to make a play; otherwise, I would be looking to play post-earnings follow-through in the direction of the initial closing move.
The last one is ULTA Salon (ULTA). I discussed this one over on Real Money Pro earlier today, but if I'm expecting big volatility, it comes from this name. While historical average has favored a small move, trend has the appearance of changing here and the R-Squared is strong in terms of earnings expectations and causality of past reports in conjunction with the trend. A good-sized short interest along with some recent volatility in retail do have options for June expiration pricing in a 10.9%, but I think we'll see something close to that by expiration if not sooner.
