Options Trades Show Swings in Retailers' Stocks -- WSJ
August 21 2019 - 3:02AM
Dow Jones News
By Gunjan Banerji
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 21, 2019).
It has been a wild earnings season for retailers, and options
traders are bracing for bigger stock swings for some shops.
Shares of big retailers such as Home Depot, Inc. and Kohl's
Corp. recorded large moves in trading Tuesday and were some of the
biggest winners and losers in the S&P 500.
Home Depot climbed 4.4% after the home-improvement retailer
reported second-quarter earnings, for its largest single-day jump
this year. Meanwhile, Kohl's lost 6.9% after it released quarterly
results, making it one of the biggest losers in the S&P 500
Tuesday.
Some investors expect this type of volatility in the sector to
continue, forecasting big moves up or down for retail companies
reporting earnings in coming days. Investors have had to parse the
impact of escalating tariffs with China as well as evolving
consumer tastes in recent reports.
Home Depot warned Tuesday that tariffs could weigh on growth,
but its quarterly profit still topped analyst expectations.
Options traders are forecasting a roughly 11% move in Nordstrom
Inc. shares after the retailer reports its latest financials
Wednesday, above the average 6.7% over the past eight earnings
releases, according to data provider Trade Alert. The stock has
been volatile over the past month, falling roughly 24% in
August.
That projection is based on a trade known as a straddle, which
measures the size of the swing in either direction rather than the
direction of the move itself. The trade involves buying both
bullish and bearish options contracts that allow investors to buy
or sell stock at a specific price.
Similarly, options traders are also betting on up to a 13.6%
move in BJ's Wholesale Club Holdings Inc. shares after the company
reports results on Thursday. Historically, the stock has swung an
average of 4.7%, Trade Alert data showed. Traders are wagering on
bigger moves than historically recorded for Ross Stores Inc., too,
according to Trade Alert.
Retailers are undergoing a volatile earnings season that has
separated some strong winners from losers. The latest earnings
reports have been punishing to companies that investors weren't
pleased with, such as Tapestry Inc. Investors have cheered other
companies like Walmart Inc. after their earnings, driving some
share prices higher.
It looks like these divergences could continue.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
August 21, 2019 02:47 ET (06:47 GMT)
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