Beyond Meat and Duolingo Soar Post-Earnings! How to Seize Trends Ahead with Options Data?
Although the Q4 earnings season for US stocks is coming to a close, this week's market has been quite exciting!
On Monday, electric vehicle maker Li Auto ($LI) surged over 18% after its earnings report, igniting market sentiment.
After the bell on Tuesday, Beyond Meat ($BYND) soared over 70% following its earnings release.
After Wednesday's market close, language learning app Duolingo ($DUOL) exceeded expectations on subscriptions and profits, pushing its stock price up by 22%.
(Source: Midjourney)
How to capture the stock trends during earnings season? In fact, options data has provided some "spoilers" ahead of earnings. Let's delve into Beyond Meat ($BYND) and Duolingo ($DUOL) as examples.
Beyond Meat($BYND)
Beyond Meat is scheduled to release its earnings post-market on Tuesday, 27th February. Options activity spiked during the late afternoon of Tuesday, with large bullish positions flooding in, indicating a clear sentiment shift:
(Data Source: TradingFlow.com, Smart Option Flow, 27th February)
Looking at the overall data, bullish sentiment surged before the earnings announcement, surpassing the stock's previous highs of the day:
(Data Source: TradingFlow.com, Smart Option Flow, data as of 27th February)
Upon closer examination, the OTM call options with a strike price of $12 in the late afternoon boosted bullish sentiment:
(Note: The horizontal axis represents time, with the right side closer to the market close)
Options Notebook
The mentioned terms like DEX may seem unfamiliar to some readers. Detailed explanations are provided below, but if you're already familiar, feel free to skip this section:
DEX (Delta Exposure): Option dealer delta exposure converts option trading size to an equivalent stock volume (bought or sold).
2. Smart Option Flow & Full Option Flow
2.1 Smart Option Flow
Smart Option Flow returns real-time and historical structured data for Unusual Options Activity (UOA), representing anomalies in the Options Order Flow. Usually, the premium of Smart Flow Data trades will be no less than $25K. Data latency is generally within 1 minute.
2.2 Full Option Flow
Full Option Flow offers a complete end-of-day data summary, allowing for comprehensive post-market analysis.
2.3 Difference
Smart Option Flow aggregates sweep order data within a specific time range, helping investors uncover the hidden motives behind aggressive trading behavior and facilitating the timely discovery and capture of trading signals during the market session. On the other hand, Full Option Flow provides all options trades (such as time, amount, and quantity), without any filtering or summarizing, making it more suitable for investors to review and analyze the market after the trading day ends.
Duolingo ($DUOL)
Duolingo announced its earnings post-market on Wednesday, 28th February, with signals of stock movement appearing earlier than Beyond Meat. According to the Full Option Flow data, large funds had entered the fray as early as 13th February, indicating a very clear bullish sentiment:
(Data Source: TradingFlow.com, Full Option Flow, data as of 28th February)
Upon comparing the options chains between the 13th and 14th, it's evident that the open interest for the put options contract, expiring on 2024-02-16 with a target price of $210, dropped from an initial 882 contracts to 788 contracts on the following day's opening, marking a decrease of 94 contracts. Considering stock hedging, these 94 contracts represent approximately 9k shares. Conversely, the open interest for the call options contract, expiring on 2024-05-17 with a target price of $240, surged from an initial 105 contracts to 940 contracts at the start of the next trading day, a volume equivalent to 22k shares of the underlying stock. Such movements deviate significantly from typical trading volumes.
At the same time, we can observe that the open interest for the call options contract with a target price of $260 expiring on 2024-02-16 decreased from an opening of 910 contracts to 825 contracts on the next day's open, a decrease of 85 contracts. However, due to the small delta, the corresponding need for hedging the underlying stock is almost negligible. Therefore, even though the net DEX value for this contract was significant on that day, we can see that it did not significantly affect the open interest for the next day's options chain. Hence, we can consider that the large buy orders for this contract did not enter the options chain, and its impact can be largely ignored.
Looking at the Smart Option Flow data, there is a high probability of new bullish call trades betting on Duolingo's rise post-earnings during Wednesday's trading session. Interested readers can check out the relevant data on the Smart Option Flow section of at TradingFlow.
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