As options traders, we're always checking in on volatility expectations. Three names with speculators pricing in post-earnings swings of more than 20% are Applied Optoelectronics Inc (NASDAQ:AAOI), Infinera Corp. (NASDAQ:INFN), and 3D Systems Corporation (NYSE:DDD). Here's some data around the shares of AAOI, INFN, DDD, as all three companies ready to report after the close tomorrow, Aug. 7.
AAOI stock has been an astronomical loser during the past year, giving back three-fourths of its value to trade at multi-year lows. As a result, short sellers are all over the shares, holding more than 40% of the float, which would take more than 12 sessions to buy back, based on average trading volumes. These traders are likely using calls to hedge, since eight long calls have crossed for every put during the past 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).
Applied Optoelectronics has made very big moves after earnings over the past two years, averaging a swing of 14.3%. But speculators are pricing in a much larger move this time around, with implied volatilities forecasting a daily move of 26.1%, That'd be the biggest single-day earnings move in two years.
INFN shares have also had a horrendous year on the charts. The stock is down 57% year-over-year to trade at $3.69, and was recently rejected by the $4 level, near the site of a May bear gap. Short sellers control 14.4% of the float, or 7.5 days' worth of buying power, going by average volumes.
These bears will be hoping for a repeat of last quarter's release when Infinera dropped almost 27% the day after earnings. The equity has actually averaged an earnings swing of 20.9% during the past two years, but even this falls short of the current expectation from options traders of a 26.5% move.
Finally, 3D Systems has gapped lower on multiple occasions in the past year, including a 18.8% drop after the last earnings report. The options market is betting on a little more than a repeat this time around, pricing in a 20.3% move for Thursday's session.
Short sellers already control roughly one-quarter of the float, and the shares are facing off against technical resistance before earnings. Peak open interest on the equity sits at the front-month August 13 call, though most of these positions crossed at the bid price, suggesting sell-to-open activity could have taken place. The shares were last seen 0.8% lower at $8.18.