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    Post Correlation Between Options Activity and Earnings Report

    I'm not a big trader, but sometimes get intrigued by the stock talk that goes around the office. I was wondering if there is a correlation between option activity before an earnings report and the price after earnings report.

    For those that don't know what CALL or PUT options are, it's simply a tool used for high risk, high reward.

    Buy CALL options when you want to bet a stock will go up
    Buy PUT options when you want to bet a stock will go down

    It's extremely dangerous, and I wouldn't get in any deeper than that if you have not yet.

    ----
    That said, Let's look at today's earnings activity.

    Just looking at the companies with bigger market cap
    FFIV, QCOM, BIDU, EBAY, NFLX, WDC

    FFIV - about the same CALL vs PUT options
    - up 7 percent afterhours

    QCOM - about the same CALL vs PUT options
    - up 5 percent afterhours

    BIDU - about 2x+ more CALL options
    - up 3 percent afterhours


    EBAY - about 2-3x more CALL options
    - up 3 percent afterhours


    NFLX - about the same CALL vs PUT options
    - down 9 percent afterhours

    WDC - about 4x more PUT options
    - down 3 percent afterhours


    Seems like you can just bet on a stock to go up or down before earnings if there is a clear sentiment by looking at the options, take that bet. Ignore the ones that don't have a clear call vs put ratio.

    I should probably write a script that does this sort of thing for bigger cap companies to see how often this holds true - when I have time anyways :P
    Last edited by Spoofee; 07-21-2010 at 05:25 PM.
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