Pre-earnings put push
- ALGM put volume nearly 490 times avg. on Thursday
- Stock trading near longer-term support-resistance level
- Stock has rallied on 12 of past 16 earnings days
While megacap tech earnings will likely be a big part of next week’s market discussion, some traders may also be keeping an eye on a much smaller tech company, Allegro Microsystems (ALGM).
On Thursday—one week before its scheduled earnings announcement—ALGM landed on multiple LiveAction scans for unusual options activity, including high put volume:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
The big trades: With the stock trading a little above $24, more than 27,000 of the February $20 puts changed hands, along with 10,500 of the February $22.50 puts. The trade in the $20 puts alone was 346 times ALGM’s average daily put volume of 78 contracts. Overall, yesterday’s put volume was more than 487 times average.
Earnings are approaching at an interesting time, given the stock recently rallied to test a former support level turned resistance, which the stock initially broke below in July 2024:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
As of Thursday, the options market was forecasting ALGM to make a +/-7.8% earnings day move. The following earnings-move profile shows the stock has rallied on earnings day 12 times (green columns) and fallen four times (red columns) over the past 16 quarters:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
The chart also shows ALGM’s actual average earnings-day move (yellow dashed line) is +/-4.9%, and only three (Q3 2023, Q1 2024, and Q3 2024) have been double-digit percentage moves, up or down.
Regardless, Thursday’s large options trades have the potential to make this under-the-radar tech stock just as interesting as its high-profile brethren next week.
Market Mover Update: Williams Companies (WMB) closed lower for a second day in a row, while its options implied volatility declined for a fifth day since hitting a multi-month high on January 15 (see “Taking a position on volatility”).
Crude oil prices fell for a sixth-straight day on Thursday. March WTI oil futures (CLH5) hit an eight-day intraday low of $74.22, reversing earlier gains after the White House said it would try to pressure OPEC into lowering oil prices. Energy has been the weakest S&P 500 sector over the past five trading days (see “Energy sector’s fortunes reverse with oil surge”).
Today’s numbers include (all times ET): existing home sales (10 a.m.), consumer sentiment (10 a.m.).
Today’s earnings include: American Express (AXP), HCA Healthcare (HCA), Verizon Communications (VZ).
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