Pre-earnings fireworks
- MOD up 8% intraday one day before earnings
- Call options volume nearly 16 times average
- Earnings-day moves skewed to upside in recent years
At first glance on Tuesday, Modine Manufacturing (MOD) may have appeared to be getting an early start on today’s earnings announcement. With the broad market in the process of turning a small intraday gain into a small intraday loss, MOD jumped 8% in early trading, breaking out above its May-July highs:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
While MOD is scheduled to release its numbers after today’s closing bell, news broke yesterday that the company, which has long produced thermal-control products for autos and buildings, plans to invest $100 million to expand its manufacturing capability in the US for data-center cooling products.1
Meanwhile, the stock was near the top of the LiveAction scan for high call options volume, with more than 10,000 contracts changing hands vs. a daily average of 645. Activity was concentrated in the August monthly options, spread across strike prices between $95-$120:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
A rallying stock and elevated call volume arguably have bullish overtones, but longtime traders know that first impressions of such data can be misleading. First, while call buying may be considered bullish, there’s a seller for every buyer, and those traders may have a different outlook on the underlying stock.
Second, in this case volume in four of the five most actively traded calls was less than (or the same as) the open interest (OI). If today’s OI in some or all of these contracts is higher than shown here, it means traders were opening new positions. If the OI is lower, it means they were liquidating existing positions.
But just because traders may have been getting out of call positions more than they were getting into them doesn’t necessarily negate a larger bullish outlook. Some traders who had previously bought calls may simply have taken advantage of a strong up move in the stock to take profits on their positions—before the uncertainty of earnings potentially jeopardized those profits.
That could especially be the case given yesterday’s up move was roughly the same magnitude as MOD’s average earnings-day move (+/-7.68%, yellow dashed line below) over the past 12 quarters:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
The purple columns represent the market’s estimated earnings moves, while the green and red columns show the actual gains or losses, respectively. MOD’s past 10 earnings-day moves have been evenly split between gains and losses, and the past eight have alternated between rallies and declines. Over the past 38 earnings announcements, dating back to 2016, MOD has rallied 26 times and declined 12, with a median gain of 8.2% and median loss of -7.2%. Its biggest earnings-day rally was 30.4% (in 2020), while its biggest decline was -40.8% (in 2019).
Today’s numbers include (all times ET): mortgage applications (7 a.m.), ADP Private Employment Report (8:15 a.m.), GDP (8:30 a.m.), Pending Home Sales Index (10 a.m.), EIA Petroleum Status Report (10:30 a.m.), Fed interest rate announcement (2 p.m.).
Today’s earnings include: Apple (AAPL), AbbVie (ABBV), Amazon (AMZN), Baxter International (BAX), Bristol Myers Squibb (BMY), Clorox (CLX), Coinbase (COIN), CVS Health (CVS), Kellanova (K), Mastercard (MA), MicroStrategy (MSTR), Reddit (RDDT).
Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.
1 Dow Jones Newswires. Modine Shares Up on Plans to Spend $100M to Expand Manufacturing. 7/30/25.