Top Strategist Talks About Options Activity Ahead Of Earnings: Facebook, Twitter & Yelp

On Tuesday, Benzinga spoke with TD Ameritrade Chief Strategist JJ Kinahan about options activity in a few stocks ahead of earnings. So, let’s take a look at his thoughts on Twitter Inc TWTR, Yelp Inc YELP –both scheduled to announce their financial results after the market closes on Tuesday, and Facebook Inc FB, which will report on Wednesday evening.

Twitter

Analysts at TD Ameritrade have seen big options activity in the company ahead of earnings: 2 and a half times the normal amount of calls, and 3 and half the regular amount of puts.

What’s really interesting to the strategist here is that the implied volatility is at the 80^th percentile for the year. He notes that, “obviously, the stock is rallying pretty strong into earnings today.” In fact, shares are up more than 4 percent.

Kinahan adds that there’s been “no particular pattern in terms of buyers and sellers.” The firm has seen “both sides being played out pretty well here.”

So, the implied move is about 12.5 percent, the analyst concludes.

Facebook

On the other hand, the social media behemoth is expecting an 8.5 percent move on earnings. Kinahan highlights that the stock’s implied volatility is at the 87^th percentile, even higher than Twitter’s.

The firm has been seeing, once again, strong options activity ahead of the report, “about 1 times the amount of normal calls, 1 times the amount of normal puts trading in there.”

“There have been some pretty good size spreads trading in there,” he adds, pointing out one move in particular: “a client sold the July $87 put in order to financing the purchase of the July $97.5-$107 calls.”

However, Kinahan states, it is not clear what other stock was against that trade. On it’s own, it’s a very bullish move, he supplements.

Yelp

Finally, Yelp’s stock has a 13.3 percent move priced in, while implied volatility stands at the 90^th percentile.

The strategist goes on to tell Benzinga that the puts have traded almost five times the normal amount, and the firm has seen a lot of buyers of the July $29 and July $30 puts. This means the market is relatively bearish on the stock, as speculation mounts.